Jeremy Hunt will give his first Budget as Chancellor next Wednesday, having already been at the centre of attention when unravelling the disastrous tax and spending plans of his predecessor.
Kwasi Kwarteng’s infamous mini-Budget last September caused market chaos, led to emergency intervention in bond markets from the Bank of England, and sent mortgage costs shaprly higher.
Hunt will be keen to enhance his own reputation as a safe pair of hands next week, when the political spotlight shifts to 11 Downing Street from next door.
With the cost-of living-crisis still part of everyday life and an election due by January 2025 at the latest, Londoners across the capital will be watching for what the measures mean for them.
Energy prices remain a hot topic as an icy blast of winter weather reminds Brits that the government support for energy bill is due to get less generous at the end of the month. The cost of capping the average annual household bill at £2,500 has fallen in line with wholesale gas prices, leaving room for Hunt to outline fresh measures running beyond April, which could be targeted at lower-income households.
Laura Suter, head of personal finance at AJ Bell, called it a “no-brainer” for Hunt to extend the scheme “for a few months,” adding: “The plan to make the Energy Price Guarantee less generous in April at the same time as the government stops the monthly rebate we’ve all been getting off our bills would have landed the average household with an extra £900 on their annual fuel bills in one swipe.”
Neil Wilson, chief market analyst at Markets.com said: “Given the decline in [wholesale] energy prices … it makes sense to pursue this as it would only be for a short period and would help smooth out consumer energy bills.”
In the City, concern about London’s reputation as a venue for international business has been stoked news of a series of companies seeking listing for their shares abroad. Arm, the chip designer was the most notable among them. It will make New York its home when its Japanese buyer, Softbank, returns it to status as an independent public company.
The City will be on watch for detail on a long-held government intention to help streamline rules here, which have long been seen as a potential benefit of Brexit, so far to no avail. Moves to encourage domestic pension funds to increase their investment in London-listed stocks are also a possibility.
There are hopes for incentives to attract international businesses to the UK via tax breaks and subsidies for research and development. After the US government’s recent success with measures to attract green investment and incentivesto cut carbon emissions, measures here will also be scrutinised.
Justin Arnesen, tax partner at Evelyn Partners, points to “a wider review of how the Treasury incentivises investment in decarbonisation, including through changes to the tax system.”
It was a dizzying sell-off in UK government debt that began the financial crisis around September’s mini-Budget, sending the yield on gilts sharply higher. A wider pattern for higher yields is in already place into Hunt’s Budget.
While his commitment to lower borrowing will be scrutinised by the global investors who buy UK debt, turmoil this time is unlikely. Markets.com’s Wilson said: “Given the Chancellor’s fiscal conservatism, I see limited risk of any serious reaction in gilts.”
