How bad will the Budget be?

They repeated that blatant lie throughout the GE campaign and the stupid labour voters lapped it up

Indeed they did, day after day for weeks leading up to the election all we heard from Starmer was smash the gangs and no tax rises. Yet after three months we have record numbers of illegals crossing the channel, and record tax rises and borrowing announced. And no one other than GB News seems to be talking about it.

As I have stated before its easy to tell when a Politician is lying, their Lips move

London's FTSE 100 falls after Labour's first budget......

The UK's FTSE 100 fell to an over two-month low on Wednesday, dragged down by the healthcare sector, while midcap stocks got a lift even as the latest UK budget came with the biggest tax increases in three decades.

The blue-chip FTSE 100 fell 0.7% to its lowest level since August 9, weighed down by AstraZeneca and GSK......

The midcap FTSE 250 rose 0.3% as market players deemed the new Labour government's first UK budget to be less punitive on businesses than many had previously feared.

Small cap stocks got an even bigger boost. The FTSE AIM index rose about 4%, logging its biggest one-day rally since April 2020.

Finance minister Rachel Reeves said she would raise taxes by 40 billion pounds ($52 billion) a year, much of it paid by businesses and the wealthy, and she blamed the Conservatives for leaving her Labour Party with a "black hole" in the budget.

"By 2029 fewer people will drift into higher tax bands now that thresholds will be uprated with inflation once again. This tax tweak, coupled with the rise in the minimum wage, will eventually put more money into consumers’ pockets," said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

Ref the budget; whether it's seen as good or bad is personal I suppose, it's certainly not going to adversely affect me. But I'm listening to far wiser people than me who say it's not a budget for growth, even Labour commentators are sheepishly conceding the point and saying it's a low growth budget, and without growth the economy will not grow and if the economy doesn't grow then what... borrow more? The long term economic forecast for this typically socialist budget, does not bode well. 

Bad news for businesses. To stimulate growth, you reduce tax, not increase it. NI and minimum wage, more full time roles will just be replaced with part timers to avoid the NI cost, plus, less jobs in general. Then prices will have to increase. In the end, Joe Public suffers.

I forsee high street shop closures accelerating. Everyone wants everything for nothing, high street businesses will suffer.

Well most businesses are of course not going to be able to just absorb the increased NI burden without in some way adjusting downwards their operating costs or upwards their income streams. These costs will therefore be borne by lower pay rises for employees, lower recruitment levels, or higher prices for consumers, or some combination thereof. There is no such thing as a tax raid on businesses that does not impact upon the rest of us, at least indirectly.

That said, with underpaid public sector workers increasingly walking away, public services barely functional, there was a chronic need for more public investment and this does not come without costs. The big three tax revenue streams are VAT, Income Tax and NI. It is difficult to raise large extra sums without using at least one of these, so targeting employers from Labour's perspective looks like the least bad option. Any hit to workers from doing this will be a lot less obvious on their pay slips than if employees NI had been increased. In other words, though working people will still be paying the price in the long run, Labour are banking on many more of them not actually noticing. Typical Labour centrist cynicism.

But since the money had to be raised somehow, how else could the £25 billion resulting from this increase have been raised? What alternatives were there? And any suggestions that giving the poor a damned good kicking instead - especially the working ones - would not be persuasive, as this would do more harm than the NI increase is likely to do to those least able to afford it.

In my view there was certainly more scope for wealth taxes on the super rich, particularly on immoveable assets like property or land which cannot be shifted abroad or physically hidden. This might have raised a few billion but nowhere near the £25 billion level. So what other alternatives could there have been? A land value tax might well have raised some of it. There was definitely scope for windfall taxes in a few areas but such taxes are one offs by their nature and best used to fund one off expenditures, eg post office scandal compensation. Or one off infrastructure expenditures. That sort of thing. Taxing dividend income at the same rate as taxes on earned incomes would have raised a bit. Because there is a loophole there that can readily be exploited. I know someone who a few years back earned a six figure sum from her own business. But she paid herself minimum wage and took most of her income in the form of a dividend, thereby paying much less tax than you or I would if we had a similar but salaried income.

Had some of these things been done, we could at least have hit employers less hard with NI contributions, by raising some of the monies required in these other ways.