Budget 2024: Striking a Balance Between Revenue and Growth
The path ahead is filled with many stumbling blocks ...
Posted by Roger Eddowes on 28/10/2024 @ 8:00AM
As Chancellor Rachel Reeves steps boldly onto the economic stage, the new Labour government's first budget presents a formidable challenge: the search for £40bn. The potential ways she will find that have sparked intense speculation ...
Budget 2024 must strike a balance, but there are many stumbling blocks ahead that could cause a backlash!
Over recent weeks, all the leaks, speculation and scuttlebutt in the press simply reveal the intricate balancing act that a Chancellor must perform. While it may seem straightforward from a distance, the reality is anything but.
One of the hot-button issues is pension tax relief. A massive outlay of approximately £27bn each year labels it as a prime candidate for reform. However, proposals to alter benefits for higher-rate taxpayers conjure images of chaos in the public sector.
With unions warning of strikes if pension adjustments threaten doctors and nurses, the stakes are incredibly high. This precarious dance has led many to retreat from even suggesting modest changes to these vital benefits.
High-net-worth individuals have also been under scrutiny as well. The allure of targeting non-doms and Capital Gains Tax (CGT) exhausts the Treasury's advocates. Yet, the fiscal data tells a sobering story: a significant portion of income tax revenues comes from the top 1%, including those already contributing substantial sums to the coffers.
Increasing their tax burden risks triggering a cascade of wealthy individuals emigrating, taking their funds with them. This apprehension creates a stalemate, as many question whether the potential gains would offset the losses.
Undoubtedly, the buzz around increasing employer's National Insurance Contributions appears both plausible and perilous for Labour, especially as it was recently reported that thousands of small business owners have shut down their companies in the face of this potential change.
The figures from the Institute for Fiscal Studies (IFS) add urgency to Labour's pursuit of solutions. As needs swell, estimates of the resources required to maintain current public spending have escalated from £25bn to £40bn. The clock is ticking, and the potential for a backlash looms large.
Tax reform has become a precarious puzzle with countless interlocking pieces; navigating this complex landscape is essential to maintaining public services while also fostering growth and investment. With half measures offering little in the way of sustainable solutions, the risk of backlash among taxpayers and businesses escalates!
In closing, I feel that Labour's nuanced efforts signify a commitment to reshape the economic environment, but the path ahead is filled with many stumbling blocks. Success hinges on striking the right balance.
We shall wait and see what is announced on Wednesday.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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