Over the past eight weeks, there have been at least 19 separate tax rises speculated in the mainstream media, of which at least 15 were initiated by the Treasury or Government sources flying kites to test voter reaction. Paul Wilson, Director and Managing Partner of IFA Magazine, explores the rising budget speculation and the role of budget purdah.
This year, the flow of stories has been particularly marked, and with the budget seemingly promising to take more money out of almost everyone’s pocket, it is no surprise that so much attention is focused on what might happen and what the intended or unintended consequences could be. The stories are being placed before an audience eager to engage.
It was not always so. Until 1996, the UK scrupulously observed budget purdah, a news blackout from the Treasury in the budgeting period designed to stop market distortions. This was a matter of honour and tradition, so in 1947, when the Chancellor Hugh Dalton got caught briefing a journalist minutes before delivering his budget, he resigned. For the next 49 years, Chancellors took it very seriously. Norman Lamont made quite a thing of it during his tenure as Chancellor.
The dam started to break with the leak of a pre-budget report in 1996, which claimed no resignations or prosecutions opened the door for unauthorised briefings, and by 2002, Treasury leaks testing potential tax and spend changes were increasingly common, sometimes to Gordon Brown’s irritation. A Treasury report in 2011 under George Osborne formalised media access on the basis that it was better to place the story directly rather than have it appear from a rogue source. It also allowed the Treasury to market-test its ideas.
The extent of the press briefings has extended well beyond the 2011 decision to allow briefing for transparency, which was tempered with secrecy on matters which might distort markets or allow taxpayers to exploit loopholes which were being targeted.
Elsewhere, our former EU colleagues Germany and France still don’t allow it, with sackings and legal sanctions for breaches.
Has the pendulum swung too far in the UK on this? Many estate agents would say that for them and their vendors, it has. Perhaps it’s time for a cross-party review of the parameters for legitimate pre-budgeting briefings to rebalance prudent and transparent debate with overt political testing of policy.
The 15 tax stories placed in the media are:
- Income tax rate increase
- Income tax threshold freeze
- NI on professional partnerships
- Council tax hike on high-value homes
- Pay per mile on EVs
- Pension tax relief reduction
- Pension tax-free lump sum cap
- IHT nil rate band freeze
- IHT gifting rule restrictions
- IHT cut on AIM Shares
- CGT tax hike
- CGT allowance reduction
- CGT on high-value homes
- Wealth or exit tax on emigrants
- Cash ISA allowance reduction
And the four that seem to have come from editors:
- VAT increase
- VAT extension to zero-rated items
- NI rate increase
- NI on landlords’ rental income
Conclusion
So, where does all of this leave us? Speculation is now seemingly built into the pre-budget cycle, and while it may help the Treasury gauge public sentiment, it also risks fuelling uncertainty, distorting behaviour and turning serious fiscal planning into a rolling political sound check.
Transparency is a good thing, but so is stability, trust and a level playing field for taxpayers, advisers and markets alike. As the next Budget looms, the question isn’t just what taxes may rise or fall, but whether the UK still values the discipline and purpose that purdah once offered.
Perhaps the time has come to decide whether we continue with open-season briefing, try to rebuild some guardrails or find a smarter middle ground that informs without unsettling.
By Paul Wilson, Director and Managing Partner of IFA Magazine
Paul is a Director and Managing Partner at Clifton Media Lab, the organisation which sits behind Tax-Efficient Investment Magazine, as well as its sister titles IFA Magazine and WealthDFM. Paul is a serial entrepreneur who has built and sold a regional IFA business and an M&A business, as well as founding and successfully disposing of businesses in other sectors such as advanced materials, construction and development.
Within the advice sector, Paul has worked as an adviser, progressing via compliance and, unusually, also via sales management to the senior management of a large national advice firm before co-founding a regional IFA firm. On disposal of that, he assisted in the founding of IFA Magazine, later taking that over. His personal interests are in film, in which he completed an MA ten years ago, as well as art, photography, economics and science.
