Some good reads from around the Web.
When I were a lad, budgets were budgets. Grown men would tremble before The Chancellor’s red box, wondering if he was about to tax their golf clubs out of existence, or cry “Loadsamoney!” and do the opposite.
In 1988 Nigel Lawson slashed the top rate of income tax from 60% to 40%, where it stayed for more than 20 years. In the 1970s Denis Healey soaked the rich with unapologetic redistribution – at least until he was forced to call in the IMF to bail out Britain.
And now? Making the headlines from this week’s budget was a 5% cut in what everyone agreed at the time was a temporary tax rate, a tiny freeze on the largesse the State shows to pensioners, and a welcome but for most relatively tiny hike in the personal allowance.
Put it through a budget impact calculator, and it isn’t likely to add up to more than few takeaway curries for the majority of Monevator readers.
Not so much class warfare as inter-generational tiddlywinks!
That’s not to say there aren’t real losers. The poorest are seeing their income fall under this government, but that’s because of benefit cuts.
Unfortunately we’re in a situation where many (including me) are less than confident those benefits were always well-targeted and helpful.
Instinctively I prefer the new emphasis on rewarding low-paid work, and removing the disincentives – with an appropriate safety net for the fallen and generous provision for the relatively few who truly can’t help themselves. (I don’t begrudge almost any amount of money being spent on quadriplegics or a soldier whose hands are blown off defusing a bomb).
At the other end of the ‘need’ scale, I’m losing out because as a childless person I’m still going to have to subsidise middle-class children in a world that has too many people in it, thanks to the fiddly new child benefit rules.
If you’re on the other side of that divide – you have kids – then make sure you read up on the new ‘cliff edge’, and calculate if it’s worth taking action.
But away from the stamp duty dodging enclaves of Chelsea and the estates without earners, it’s smokers, drinkers, drivers, and (thanks to a change in what’s classed as VAT-rated hot food) the eaters of Gregg’s pies who will feel most pain.
This ratcheting up of duty is a brilliant example of compound interest in action.
What about the investors?
The budget didn’t have much of consequence in it for private investors.
There were a few tweaks to VCT and EIS rules that won’t be relevant to many readers, although I have some of the former.
There were no big changes to mainstream concerns like capital gains tax, dividends, ISAs, and pensions.
The annual scare stories about the abolition of higher-rate tax relief also came to nothing – as usual.
Every year I get emails from worried readers about a supposed imminent end to higher rate tax relief, along with press releases from financial firms saying all higher rate taxpayers should put their life savings (/£50,000) into pensions before higher rate relief is abolished.
Why don’t I write about it, they ask? Because it might happen one day, but I don’t expect it under this government. I expect to keep hearing about how it’s coming!
(If you are lucky enough to be paying the 50p tax rate, then it could be worth getting tax relief at 50% while you can).
A few of the non-personal finance details might have consequences for investors:
- Speeding up planning could be good for housebuilders.
- Lower corporation taxes may mean more money retained for reinvestment or dividends.
- There were some new reliefs for North Sea oil companies.
- There is also tax relief for TV productions and video games and animation studios, which might conceivably help some investments. (ITV shares rose slightly on the news).
The crackdown on stamp duty avoidance on £1-2 million+ properties also has an investing dimension.
Could it finally cause a wobble at the top of the London property market? Prime London has some of the signs of bubble conditions, so I wouldn’t rule it out.
2012 budget roundups from around the web
As for what we did get, here’s some useful Budget 2012 roundups and tools:
- BBC: Budget 2012 at a glance
- BBC: Complete budget 2012 archive
- BBC budget calculator with sensible emphasis on booze and drink
- The Guardian’s top 10 changes
- Telegraph’s take on the winners and losers
- Even The Guardian can see 20-somethings are worse off than Grannies
- Budget 2012: A big splash with a little cash – The Economist
- Institute of Fiscal Studies’ number crunching slides [PDF]
- A crackly discussion from accountants Deloitte [Podcast]
- HM Treasury’s archive of Budget 2012 documents
- Inexact estimates justify 50p to 45p rate cut – Stumbling & Mumbling
Finally, I was disappointed that we didn’t see some Keynesian response to very high youth unemployment, which isn’t even producing the great music of the 1980s as a by-product.
Getting them into debt at university is an unpleasant stop-gap solution!
Did I miss any important issuance from George Osborne? Let us know below, or just share your thoughts on the budget if you like. A good rant helps, sometimes.
On the investing blogs
- When ‘buy what you know’ makes sense – Canadian Couch Potato
- How to make your spouse love frugality – Mr Money Mustache
- Focus on the total cost of ownership – Lazy Man and Money
- Craving a high: Trading on dopamine – The Psy-fi blog
- Thinking defensively – iii blog
- Five plausible nightmare hypotheses – Graeme’s blog
- Ping pong veteran blasts Goldman Sachs – Investing Caffeine
- Deja Vu all over again [Fund manager’s PDF] – Oaktree Capital
- Using an investment checklist to value Shell – UK Value Investor
- The post-modern Ponzi scheme (Internet HYIPs) – Academic PDF
Book of the week: A Motley Fool podcast with the author of Free Capital I link to below reminded me how much I enjoyed it. (There’s a Kindle edition, too). Warning: It’s not one for the pure passive crew, unless you fancy fuming.
Mainstream media money
- Apple’s share price: iRational? – The Economist
- How to become an ISA millionaire [Podcast] – Motley Fool
- It makes no difference what the economy does – Fool.com
- Swedroe: The best fund managers don’t stay on top or cover costs – CBS
- Burton Malkiel: Bonds at 2.25% a sure loser, stocks a safer choice – WSJ
- Interest-only mortgages to become niche – FT
- Merryn: Fairness would be ultimate tax incentive – FT
- SERPs payers could lose out from £140-a-week pension – Telegraph
- Buy-to-let landlords sitting on ‘tax timebomb’? – Telegraph
- Dampier: Time the FSA made charges clearer – Independent
- Third-party solar panels can cause mortgage difficulties – Guardian
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