By the time Chancellor Philip Hammond sat down after his 72-minute Budget, investors and savers will have realised there was little in it for them.
Richard Stone, chief executive of The Share Centre, notes: “The Chancellor delivered the longest Budget speech in a decade but had little to say for personal savers and investors.”
Stock markets too were underwhelmed, despite Mr Hammond’s seemingly upbeat economic forecast. Sterling was down slightly against the dollar and the euro, but UK Gilts and UK equities were largely unchanged as the Budget neared its close.
This is despite the fact the Chancellor began his Budget statement with some good news – revealing more positive growth forecasts than were expected.
Azad Zangana, senior European economist at Schroders, says: “The Office for Budget Responsibility updated its forecast in the usual manner, and downgraded real GDP growth for this year from 1.6 per cent to 1.3 per cent.
“The Chancellor skilfully neglected to mention 2018, and instead focused on the upgrades for 2019 to 2021. The inflation forecast was revised higher in almost every year, but the good news for households is that the forecast for wage growth in real terms is positive throughout the forecast.”
Source: Brooks Macdonald and Office for Budget Responsibility
Silvia Dall’Angelo, senior economist at Hermes Investment Management, explains the Chancellor “had some room – albeit limited – to loosen his purse strings”.
“The Office for Budget Responsibility revised down its estimates for public net borrowings by £11.6bn this fiscal year and it also upgraded its estimate for 2019 GDP growth to 1.6 per cent, from 1.3 per cent,” she says.
“As a result, the Chancellor was able to meet the government’s pledge to increase the NHS funding (receiving an extra £84bn over the next five years), while avoiding tax hikes, for now.”
But with a Brexit deal yet to be struck, overall, the government’s fiscal stance will remain “slightly restrictive” over the next few years, Ms Dall’Angelo points out.
Silent on savings
Mr Stone observes the Chancellor was “silent on savings and investment” in his Budget speech.
Closer inspection of the Budget documents reveal few surprises.
While the annual Isa allowance remains unchanged for the 2019 to 2020 tax year, the limits for Junior Isas and Child Trust Funds (CTFs) will increase to £4,368 – “giving slightly more headroom for those who want to save or invest tax-efficiently for children”, Adrian Lowcock, head of personal investing at Willis Owen, adds.
“In the Budget Book it is set out that Isa allowances will stay the same at £20,000 per annum (Jisa and Child Trust Fund allowances will increase in line with CPI), but there is little other mention of pensions, savings or investments,” Mr Stone remarks.
“However, buried deeper within the Budget Book which outlines how the Government will fund its commitments, it is clearly expecting individuals to have more money to save and is making a pitch for those savings which it expects to be successful.”