As the 2017 budget statement approaches we can all have a bit of fun making predictions about the contents of the red box. Here are mine.
The Chancellor seems set to introduce measures on Wednesday 22nd Novembe that will be taken as being supportive of the younger generation at the expense of the older generation. According to ‘conventional wisdom’ the former are awash with student loan debts and condemned to years of life in rented accommodation or (perhaps even worse) the family home. By contrast the latter are allegedly luxuriating in the financial joys of equity in property, generous defined benefit pensions and non-means tested benefits (winter fuel allowance etc.) having previously enjoyed free higher education and ready access to the housing ladder when young.
So maybe it’s going to be the case of Help the Millennials rather than Help the Aged!
Mind you those in their late middle ages struggling to balance working life whilst supporting ageing parents and helping their children through university and onto the property ladder would have genuine reasons to be resentful of the above stereotyping!
So to help the beleaguered younger generation I expect permutations from:
- The freezing of (maximum) tuition fees.
- An increase in the income threshold for the repayment of fees.
- (Less likely) the reduction in the repayment rate of tuition fees for incomes above the threshold.
- (Long shot) a review in the linkage between the level of tuition fees and actual tuition time involved in different degrees (broadly broken down between different disciplines – humanities, business, sciences etc.) or in the linkage between the tuition fees charged and the quality of HE institutions (based on rankings). In short the current flat rate for fees regardless of the institution or the course of study seems at least questionable.
And to help youngsters and encourage the take up of apprenticeships:
- An improvement in the minimum national wage rate for apprentices – reducing the current gap between this rate and the minimum wage and the national living wage. The current gap is unjustifiable.
And to help young people get on the property ladder:
- The raising of the threshold for Stamp Duty Land Tax (SDLT).
- Possibly an easing in the SDLT rate for purchases above the threshold but below £250,000.
- Some tinkering with Help-to-Buy ISAs and LISAs.
At the other end of the age spectrum expect permutations from:
- A (further) reduction in the annual maximum for pension contributions that attract tax relief – currently £40,000.
- A (further) reduction in the lifetime allowance for pensions from £1m.
- Alteration of the multiple (currently x20) to assess defined benefit pensions against the lifetime allowance. Currently a £50K defined benefit pension equates to the £1m lifetime allowance (£50K x 20) – yet a £1m defined contribution pension pot can currently only generate an annuity of circa £30K to £35K depending on the circumstances of the annuity receiver.
- Reform of the tax relief on pension contributions - with the maximum relief cut to between 30% and 35%.
- No special benefits (e.g. winter fuel allowance) for higher rate tax payers regardless of age. So ‘rich’ pensioners would no longer benefit from these.
- (Long shot) NICs to be paid by those at or beyond State Pension age (SPA) subject to a minimum income threshold. Tricky one for the Chancellor given his past difficulties in respect of NIC reform!
- Higher rate of taxation of company dividends.
Also perhaps:
- A review into whether SDLT should be paid by sellers rather than buyers. This would help those seeking to trade up in the housing market (as SDLT would be paid on the lower cost house being sold rather than the higher cost one being bought).
So come Wednesday 22nd we will find out how my budget star gazing has turned out. I would be happy with a handful of correct calls and perhaps The Chancellor will surprise us all with a range of completely unexpected initiatives!
Martin Upton
Director, True Potential PUFin
17th Novemberber 2017
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