The Autumn Budget 2024: ‘You’re going to like it, but not a lot’
After a week in which many businesspeople feared they may burst a blood vessel during the Chancellor’s speech, it was over. Raikes joined them at Randall & Payne’s Budget event to judge reaction.
Dear readers,
We hope you’ve had a good week.
If you were one of those who was not finding the build-up to Wednesday’s Budget easy, we hope it passed by painlessly, or at the very least not as badly as you feared it might.
Those old enough to recall television magician Paul Daniels and his famous catchphrase will understand the origins of the headline for this particular edition.
If you have no idea who he was and want to know what the nation suffered as popular entertainment pre-internet, you can always Google him, but we don’t think you need to bother in order to get the gist of the quote.
We were lucky enough to be invited to the annual live Budget event staged by accountants Randall & Payne at Gloucester Rugby’s Kingsholm stadium and went, deciding to risk it among a room full of business people, entrepreneurs, high-net-worth individuals and the professionals who advise them - that portion of the country the Government seemed unsure were members of the working population or not.
We hope the article below gives you a flavour for the event, the atmosphere, and how the Budget was received by them. We give you a brief synopsis of the room’s reaction too. It was unanimous.
And we’d like to thank Randall & Payne, one of the Founding Partners that makes The Raikes Journal possible, for inviting us along with a special nod to Rob Case, who stepped up to ably host proceedings when duty called for Will Abbott away, and to James Geary once more for his ‘pre-match predictions’ which was our Monday edition.
You’ll have to read that edition and compare with the notes below to work out how close he was to a full-house of predictions for the second Budget running. Pretty close is the short answer.
By way of an appetiser we start it all off with a short piece based on feedback from one of the county’s most famous business godfathers, Julian Dunkerton, he of Superdry fame. He gave Raikes his own personal take on the Budget this morning, wearing his hat as the boss of Cheltenham hotel and bar 131.
Enjoy.
NB: Raikes publishes probably the best-read business-related newsletter, pound for pound, in Gloucestershire.
Julian Dunkerton responds to the Budget
The Raikes Journal was one of those invited along to No.131 The Promenade this morning (Thursday 31 October) to hear what Julian Dunkerton had to say about his plans for the Cheltenham destination.
After years of potshots post Covid about the encampment of marquees outside the listed buildings that make up the 131 collection Dunkerton is beginning to work a charm offensive ahead of his plans for a permanent structure to replace the temporary canvas.
We’ll be covering that in our next edition in full, but while we were there - and with Dunkerton firmly wearing his hospitality hat and firing on all cylinders about how he sees 131 as a catalyst for change for Cheltenham, we couldn’t resist hearing his view on the Budget.
There was the decision by Rachael Reeves that brought pressure on businesses to increase wages and national insurance contributions we thought he might have focused on.
But instead he homed straight in on there decision to introduce a “permanently lower business rates multiplier” for retail, hospitality and leisure properties from 2026/2027.
What that means is a 40 per cent relief on business rates will be introduced with a cap of up to £110,000 per business for 2025 and 2026.
“That’s a bit like ‘gravy tomorrow’,” said Dunkerton, whose Lucky Onion business employs an estimated 130 staff at 131, which is both a hotel, a bar and a restaurant.
“If you want to stimulate the hospitality industry you have to change things. The temporary measures through Covid were quite sensible. There is no reason they could not be considered more long term.
“There is also the proposal for VAT at 10 per cent for hospitality. I think that’s absolutely right.
“I am afraid I think we will see a lot of hospitality businesses go under (as a result of the Budget). They are so labour intensive that the extra costs coming down the line will be too much.”
Kate Nicholls, chief executive of UKHospitality, called the Budget “the latest blow for hospitality businesses”.
“Rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt,” said Nicholls.
“In the short term, the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it.
“Increases to employer NICs (National Insurance Contributions) and wages will make it harder for businesses to support employment and invest in their businesses.
“Avoiding the business rates cliff-edge next April was critical and it was important that some relief has been extended.
“However, the reduced level of 40 per cent is another cost that businesses have to deal with. For those small- and medium-sized operators, their rates bills will still go up in April.
“All of this means that 2025 will be painful for hospitality, with an increased annual tax bill of £3 billion for the sector.”
* The Reports & Deals section of Raikes is also home to its star attraction, the perpetual Top 100-plus Businesses in Gloucestershire list, which tracks the financial fortunes of the county’s biggest firms by turnover. We would like to thank the generous support of our Founding Partners: QuoLux, Willans LLP, Gloucestershire College, Merrell People and Randall & Payne; our sponsors Hartpury University and Hartpury College; our Founding Members and all our wonderful paying subscribers. A massive ‘thank you’ to all our other subscribers too. Your support is invaluable! If you are not already, please consider upgrading to paid (just £2.30 a week!). You’ll be able to read all of this post - and you’ll be helping to make this community interest company sustainable. Contact andrew.merrell@raikesjournal.co.uk.
The Autumn Budget 2024: ‘You’re going to like it, but not a lot’
After a week in which it looked like many businesspeople may burst a blood vessel during the Chancellor’s speech, it was over. Raikes joined them at Randall & Payne’s Budget event to judge reaction.
By Andrew Merrell.
Had it been Gloucester v Bath with the rugby season depending on a home win the crowd that gathered at Kingsholm would probably been less apprehensive than the guests that gathered for Randall & Payne and Rathbones’ live Budget event on Wednesday.
What better place for a bystander to judge the reaction of businesspeople, high-net-worth types and those who understand the detail of Budgets, than to be in a room with them, eavesdrop and watch their body language as the Chancellor delivered her historic speech.
As friendly as the occasion was this had none of the other airs a party might - such were the shockwaves sent out by pre-Budget Government briefings about capital gains tax, possible increases in National Insurance and that comment about “working people”. Guests at Kingsholm looked like they were braced for something.
And it was apparent from the weary state of individuals in the room that those pre-Budget concerns had resulted in one or two of them burning the midnight oil for clients in an effort to sort affairs and avoid any potential body blows.
Chris Wills, a partner and a corporate and commercial law specialist at Cheltenham firm Willans LLP, said he and his team had been working till 11pm the evening before to get a deal over the line – just in case.
Others had considered the same dash for the line, but realised the impossibility of it all and were forced to bite their finger nails instead and hope they would avoid any ‘penalties’ that would impact their best laid plans.
Tim Ward, a corporate lawyer at the Cheltenham offices of HCR Law, was another who could testify to the mood.
“It has been incredibly busy prior to the Budget, It has brought forward a number of transactions. People generally fearing an increase in tax rates from 28 per cent to 40 per cent or above,” said Ward.
“There’s a lot of money out there. People feel they have to put aside what happens today until they can gain a more controlled outlook,” he said.
Addressing the room from the stage was Tristan George, of wealth management firm Rathbones.
“I don’t know about you, but in my lifetime I can’t recall a run up to a Budget feeling like this,” said George.
“I understand politics is essentially about how to share out the pie, but I hope this is not a case of the people who create the pie don’t get forgotten.”
That being a reference to the general feeling that the burden of what was to come could well fall into the laps of businesses. There was to be more than a little truth to the prediction.
“I see a lot of ‘broad shouldered’ people in the room, but I also see a lot of ‘working people’ in the room. They (the Government) don’t seem to have for the venn diagram right on that,” said John Wyn-Evans, head of market analysis at Rathbones, picking up on those two phrases from Government pre-Budget that had so riled those who consider themselves, as wealth and job creators and risk takers, to be both.
“I see Rathbones has given you an empty bag as a gift. Perhaps that is a sign of the times. And if it gets really bad you can stick it over your head,” added Wyn-Evans, to which there was a ripple of laughter, with one of two even checking to make sure they had those bags close by.
What was he predicting from Reeves’ speech, the first every Budget by a female chancellor in the UK’s history?
“Some of you may recall the famous old saying by Paul Daniels TV magician – ‘you’re going to like this, but not a lot’.
“I think it (the Budget) could be a little like a magic show, a bit of diversion, and while she (Reeves) is saying ‘you’re going to like this....’ she will be picking your pocket with the other hand and taking your watch. We will see.
“Brace yourselves, I guess”.
Jame Geary, of Randall & Payne had just enough time to race through his predictions for what was to come before the room fell silent for a lengthy one hour plus.
As it turned out Geary didn’t quite match the success of his March predictions, which saw him on the money on every point, but he was only marginally off par - despite a much more complex series of announcements.
For a room full of business people, investors and employers it was inevitable where the focus would lie – not on the one pence off beer duty or the freeze on fuel duty or the extra money for the NHS, but on what would impact changes to inheritance tax, the national living wage, capital gains tax and National Insurance contributions, stamp duty, and business rates would have.
On return to the stage the panel had some answers and a little early interpretation for them.
“It comes to something when the rabbit out of the hat is ‘you’re not getting a raise’ and ‘income tax threshold has been held for another four years’,” said Geary.
“I did some quick numbers on my calculator and with National Insurance contributions increasing for employers and worked out that for someone on £40,000 a year the national insurance bill will go up by £1000 a year.
“The rise in CGT is not as big as was expected. Fuel duty was perhaps the other big surprise.”
Fuel duty being frozen (see below for more predictions).
With the stamp duty rising on second homes everyone seemed to agree that estate agents in Cornwall or other hot spots for second homes would not be happy.
Wyn-Evans said early signs were the AIM market appeared to have taken news well of the new inheritance tax rate - 20 per cent rather than the expected 40 per cent.
Everyone in the room probably recalling the reaction to Kwasi Kwarteng’s disastrous Budget of September 2022.
Reeves predicted the changes to NI would raise £25 billion pounds per year by the end of the forecast period, more than of the £40 billion the Chancellor is targeting to cover day-to-day spending.
In the last tax year, employers paid 60 per cent of the £179 billion raised by NI contributions, which after income tax is the second-largest generator of revenue.
Ian Stewart, senior financial planning director at Rathbones, somehow managed to find a laugh when he pointed out that the new Office for Value, which Reeves had just announced, would be headed up by someone who has just come from the HS2 rail project.
According to Rail Magazine that project is running at £20bn over budget.
Rob Case, who compèred the event and chaired the panel for the post-Budget session, took a quick straw poll of the room as Reeves sat down and the big screen went silent.
“Hands up if you thought it was a Budget for growth?” he asked.
No hands went up.
“Hands up if you think it was a good Budget?”
Still no one moved.
“If you think it was better than expected?”
Pretty much every hand went up at this point.
Tim Hurst, who heads up Rathbone’s Cheltenham office, had this to say by way of conclusion.
“It’s good to get some clarity. We have just had an election and a lot of anxiety about what was coming down the line. It has been palpable.
“To have some clarity and for the tone to not be as bad as some people feared means people can begin to plan how to go forward for clients.
“We need to digest the detail now and work out exactly what it all means.”
He added, perhaps summing up the reaction of many: “I had a couple of high-net-worth clients here today. One of them said me as he was leaving, ‘I will be able to go home and tell the wife it’s not as bad as I thought it was going to be’.”.
Chris Wills, of Willans, summed it up like this: “It has been a week of blind panic. Today (Budget day) was the eye of the storm where everything stopped.
“The reality is now known, that CGT has gone up by four per cent today. I’m hoping people won’t won’t wake up with a banging hangover.
“Some of those deals did not get done ahead of the Budget. I think a four per cent rise in CGT will not stop those deals being done either.
“I think people will just recalculate their numbers and get on with it.”
The autumn Budget 2024 at a glance:
Rates of National Insurance (NI), income tax and VAT paid by employees to remain unchanged.
From 2026 exemptions when inheriting farmland to become less generous.
Income tax band thresholds will rise in line with inflation after 2028 which Reeves said would prevent more people being dragged into higher bands as salaries go up.
The freeze on inheritance tax threshold will be extended by a further two years to 2030. Unspent pension pots will become subject to the tax from 2027.
Basic rate capital gains tax to go up 10 to 18 per cent on profits from selling shares to 18 per cent. The higher rate will rise from 20 per cent to 24 per cent.
When it comes to selling assitional property, the rates will remain unchanged.
Businesses to pay Natinal Insurance at 15 per cent on salaries above £5,000 from April. Previously this was 13.8 per cent on salaries above £9,100. Reeves said this would raise an additional £25 billion annually.
Businesses of all sizes will be able to reduce their NI liability by using the Employment Allowance, which will increase from £5,000 to £10,500.
The main rate of corporation tax paid by businesses on taxable profits over £250,000, will remain at 25 per cent until next election.
The minimum wage for over 21 year olds to rise from £11.44 to £12.21 per hour from April 2025 and from £8.60 to £10 for 18 to 20 year olds. Long term a single adult rate is planned.
The ‘triple lock’ on the state pention will remain, with payments going up by 4.1 per cent next year.
The allowance for full-time carers will rise from £151 a week to £191.
Purchasers of second homes will see the additional stamp duty surcharge rise from three per cent to five per cent; the starting point at which properties are liable to stamp duty will fall from £250,000 to £125,000 and the threshold at which first-time buyers will pay the tax will fall back from £425,000 to £300,000.