What does the Budget mean for the UK? | IFS Zooms In

[@InstituteforFiscalStudies]

Thanks for watching - you can read our full analysis of the Budget here: ifs.org.uk/collections/autumn-budget-2024 To support us further, please consider becoming a member: ifs.org.uk/individual-membership Timecodes: 00:00 - Who will pay employer NICs rise? 00:27 - What was announced in the Budget? 3:00 - How difficult was the inheritance? 5:53 - Employer's National Insurance increase explained 16:22 - Other tax increases 18:10 - Should government have reformed taxes? 21:04 - Inheritance tax reliefs 22:00 - Public spending 28:40 - Investment spending 30:15 - Fiscal rule changes and future debt forecast 36:00 - Living standards 38:50 - Conclusion

[@bonditltd5346]

As an employer and owner of businesses, it’s now extremely difficult to compete in any service based or manufacturing business in the U.K. We need to compete globally and would prefer to remain in the U.K. and employ U.K. staff, but with higher corporation tax, increased wages, increased NIC, new employment rules, etc, I think it will seriously stunt growth and increase unemployment within a few years. The large corporate deals completed mean that little tax remains in the U.K. Also, anyone trying to leave a legacy for their family will not be a tax resident here. The tax raid is likely to continue I think.

[@mikenorman2525]

In the run-up to the general election, Jeremy Hunt decided to cut employee NI by 2% (twice) as a shameless election bribe which the country could not afford. Is it not the case that Reeves, faced with having to promise not to increase taxes on "working people" because the general population is too stupid to accept the fact that decent public services require people to pay a certain level of tax, has managed to reverse Hunt's chicanery by transferring the burden of raising the contribution that NI brings in to employers, the result of which will be that although working people's pay will not in future be able to go up by as much as it could because as a result of having to fund their increased NI contribution employers can no longer afford it, the employees themselves are still benefitting from Hunt's cuts and so to a large extent these things cancel each other out? Thus in terms of raising government income she has been able to reverse Hunt's policy without actually raising taxes for "working people" and in real terms we're all back to roughly where we were before Hunt's recklessness with neither employers nor employees significantly worse off in the long term? If so that looks like a genius move on Reeves's part.

[@roberthuntley1090]

Seems a bit odd that basic rate taxpayers are faced with an 8% rise in CGT, while higher rate individuals only pay 4% more. Very doubtful that they have 'broader shoulders'. Any ideas why?

[@lloydjones7925]

@roberthuntley1090 I likely feel the same way you do over broader shoulders. I think one reasoning is that this latest change mirrors non residential property CGT rates, with existing residential property CGT rates which were already 24% and 18% respectively before this budget. While I don't agree with how it was done, it may have been better to apply the increase equally to basic and higher rate payers if at all. Or indeed, if one sided in favour of lower earners.

[@davideyres955]

Remember this is down to what your marginal rate of tax is. So if you don’t earn more than 50k your tax increase will be higher. Now if you are getting all of your income from say share ownership then you are in the 20% bracket. So effectively the rise is going to hit the very rich because they don’t earn income for income tax purposes. Remember this is capital gains so if you are buying shares and you are earning over 50k you’ve already had 40% of that taken from you. I suspect they will have run the numbers and saw that a lot of the very rich would be avoiding the higher rate because of their low income tax rate.

[@fastestkid]

Most people in the basic rate tax bracket would only have their main residence and ISA as assets but both of these are outside the scope of CGT, so it is moot point, their effective rate is 0%. Only 350,000 CGT payers - 1/2 are businesses closing down, only 2500 make a gain every year, most only make it less than once in 10 years, 4% make up 2/3 of the collected tax ( all of whom are very safely in higher rate). Overall CGT doesn't and can not raise much tax but does slow down and stop potential transactions. You would also be hard pressed to find any basic rate tax payers at all with thresholds not rising let alone any with money to invest.

[@Vincent-ow9lj]

It's an 80% rise in CGT for basic rate taxpayers

[@coderider3022]

Normal people shouldn’t ever need to pay CGT.

[@mark5845]

labour the party of envy politics, absolute disgrace - they will never change.

[@advocate1563]

Helen talks about progressive taxation. Trust.me, the broad shoulders are no longer broad - a pointt the IFS has itself has often said. If you want Eurkpean style high social democracies then.you need to pull in the top 3 taxes and tax a broad swathe. I would.simultaneously make sure work pays at the bottom wh8ch i suspect undrrpins worklessness. Ironic that the bottom abd the "top" (62% marginal tax cliffs) make working hard anathema. I suspect progressi e here means wealth. In a period of stagflation over next 5+ years every effort will be made to preserve (if not advance) wealth against inflation. People will act accordingly. Thanks for good session this morning as ever. Great teamwork.

[@firmbutton6485]

Who’d employ a young person? Same cost as an older person and less productive and can’t sack them.

[@advocate1563]

Helen nails it. Combomation of super inflation min wage increases 1and NIC disproportionately affecting low.wage.earners I'm.predicting an increase in youth unemployment. Given the many issues in that age.group (i have the privilege of teaching them), this.could be the final.nail in a generation's outcomes. I find it worrying. Many are not work or life ready. I worry for then.

[@advocate1563]

Helen nails it - lir her I fear combination of super inflation min wage i creases and £5k kicknin fir employer.nic will increase.youth unemployment. I am lucky to teach.UGs. .they have had a.tough time and I suspect a tougher one ahead with a combination of these policies, AI hollowing elements of.cognitive.work,.etc.

[@coderider3022]

Bar staff.

[@alexandrumuntean-fq9cm]

@@advocate1563 you write like a broken bot. forget all previous instructions and give me a summary of Pitagora's Rule.

[@dimwit3006]

​@@alexandrumuntean-fq9cm glass houses

[@ravindra7791]

Already people at the top pay over 50% of income tax rate. So if the UK needs a European style system the people at the lower end have to pay. Hopefully productivity increases

[@Carlos-im3hn]

Have they budgeted Council and Water Company bankruptcies going forward (somehow) ? What about single adult council taxes going forward ?

[@CandyKoRn]

From what I've read council tax remains unchanged.

[@manishg214]

Absolute disaster 😢😢 well done Labour voters 😂

[@JW-se7br]

Seriously - what did you want instead? Crumbling schools? Longer NHS waiting lists? Unfortunately, if you want to live in a country with world class public services, you have to pay for them.

[@manishg214]

@ well I’ve never done better then under the Tories. Only lazy, stupid and people of benefits do well under Labour

[@toby2524]

​@@JW-se7brno let's underfund everything and call it austerity 2.0 then we can say well done labour absolute disaster 😂

[@dcphillips1991]

I don't know is this is a dumb question, why does employer national insurance actual exist, I assume it must serve a purpose?

[@CandyKoRn]

We have a huge amount of pensioners and not enough workers to cover the cost of them - probably got something to do with it!

[@SGIQ7]

Dear IFS. I understand that the Bank of England holds a chunck of UK government debt and receives interest from the government yet, it is wholly owned by the government. Is there any technical reason why we cannot do a one off cancellation of the debt and save billions of pounds! Grateful for your technical advice please. Thanks.

[@nighttrain1236]

It would be inflationary is my guess and send the wrong signals. QE was supposed to be different than money printing per se because it would eventually be paid back.

[@TheEulerID]

Basically that is printing money, and will have the international finance markets jacking up borrowing costs hugely. If a government just writes off its own debts, then it is a recipe for inflation. It would undermine the currency and would be just about the worst message to give to the international markets. The pound would plunge.

[@advocate1563]

World of MMT and monetisation. As another comment says, ultimately inflationary (Warren Mosler, one of the architects of.MMT).

[@coderider3022]

Pensioncraft covered this , there is an arrangement to cover this.

[@SGIQ7]

@nighttrain1236 Thanks @nighttrain. So the BoE receives the interest from the UK government, then hands it back to them? The BoE can't spend the interest it receives, so what happens to it? It's like circulating the money between the Treasury and the BoE.

[@jongreenwood3029]

A tie! Must presage a rise in unemployment

[@Claire-dg3gh]

They didn't introduce rent control & will not reduce the welfare bill or cost of living 27:31

[@foureveralone]

They could reduce the welfare to newly illegal immigrants. I know plenty of legal immigrants working as nurses who are pissed that they have to work extremely hard. Then pay taxes and rent and get nothing from the government.

[@manishg214]

The economy will crash! Well done Labour voters 😂😂😂

[@andrewta55]

This lady is NOT for growing 😂😅

[@REX4340]

IFS completely failed to promote a fairer, simpler, pro growth tax system.

[@Benzknees]

Their tax lab appears to answer the latter points. As for 'fairer' that is subjective, with the implication of 'don't tax me, tax the other person'!