A more favourable economic backdrop in the UK than at the previous statement has given chancellor Jeremy Hunt some extra cash to deliver on his promise to cut taxes.
The measures announced in today’s Autumn Statement didn’t convince industry experts, however, who described them as “downbeat” and “a mild disappointment” – albeit with some silver linings for investors.
Below, Trustnet collated the main industry reactions to this morning’s announcements.
Rathbones’ Jones: ‘Headline-grabbing tax cuts will be offset by de facto increases elsewhere’
Despite significant tax cuts, Rathbones’ head of asset allocation Oliver Jones said that “fiscal policy is not being loosened significantly”.
“Yes, there are some headline-grabbing tax cuts – but they’ll be offset by de facto increases elsewhere. The continued ‘fiscal drag’ from the extended freeze in income tax thresholds will help push tax payments as a share of GDP up to a record high.
“The measures announced today won’t alter the trajectory of the UK economy, which is currently entering a downturn accompanied by falling inflation.
“With a general election looming next year and a change in government as its most likely outcome, some of the specific measures announced this week may have a shorter-than-usual shelf life.”
Despite describing the Autumn Statement as “downbeat”, he saw silver linings for investors.
“One is the appeal of UK gilts, which tend to rise in price during recession and sustained stock market falls, as investors flock to the security of a fixed return from the safest of issuers. On top of that, central banks usually cut interest rates during recessions to mitigate the economic fallout.
“Historically, government bonds have performed well in the months ahead of such decisions.”
Aegon’s Lynch: ‘A mild disappointment but not a disaster’
James Lynch, fixed income manager at Aegon Asset Management, described the statement as “a mild disappointment but not a disaster for gilts”.
“The chancellor had the ability to save or spend – he chose to spend. The market was expecting somewhere around the £10bn to £15bn area in cuts to gilt issuance this year but only got £0.5bn taking total gilt sales to £237.3bn, due to the measure announced today. Treasury bills were however reduced by £10bn.
“Short term, the focus of the gilt market will be the extra auctions that were not expected, medium term it will be the economic fundamentals of GDP, inflation and BoE rates that will still be determining the level of gilt yields.”
AJ Bell’s Suter: ‘A classic case of giving with one hand and taking far more with the other’
Laura Suter, head of personal finance at AJ Bell, said that Hunt’s decision to cut National Insurance (with a £9.44bn price tag for the government) might seem “pretty meaty”, but it pales in comparison to the £50 billion a year the government is expected to make from freezing income and National Insurance thresholds.
“It’s the classic case of giving with one and taking far, far more with the other. While the tax cut will be welcomed by workers around the country, they shouldn’t overlook the fact that they are still paying more in tax than if the government had never frozen thresholds.”
“National Insurance is an odd choice for a crowd-pleasing tax cut to garner favour with voters. But there are two good reasons: one, it’s only paid by workers, not by pensioners, meaning it fits the government’s agenda of making work pay and boosting the finances of the working population. Two, it leaves the door open for a far more popular income tax cut next year, when we’re closer to an election and the government is reaching for a policy that has broad appeal and understanding.”
AJ Bell’s Selby: ‘A tinker at the edges rather than a radical pursuit of ISA simplification’
Tom Selby, head of retirement policy at AJ Bell, lamented that the chancellor has chosen to tinker at the edges rather than pursue radical ISA simplification for the benefit of savers and investors.
“Today Jeremy Hunt had an opportunity to tackle this complexity head-on in his second Autumn Statement. Sadly, he appears to have bottled it. It is also disappointing the ISA allowances will remain frozen for another year – although at least the wrong-headed ‘GB ISA’ proposal many have been pushing appears to have been consigned to the policy dustbin.
“Allowing people to pay money into more than one ISA of each type in a tax year is a sensible move, making it easier for investors to try out different stocks and shares ISA providers, while cash savers could open multiple new ISAs as new deals become available.
“However, this is hardly an earth-shattering change in its own right. It should instead have been the foundation upon which more fundamental simplification was built.”
Winterflood’s Croucher: ‘Fractional shares could provide a significant boost to the stock market’
Steve Croucher, commercial officer at Winterflood Business Services, praised the initiative to allow fractional shares to be included in ISA products.
“Wider access to fractional shares could provide a significant boost to the stock market in the coming years as investors, regardless of size, get access to the full spectrum of equities through ISAs.”
“This will have a positive impact on smaller ordinary retail investors, and investor democratisation, as fractionals will allow them to invest in shares that would, otherwise, be too expensive to buy in whole amounts.”
BNY Mellon’s Parkin: One pension pot for life ‘seems sensible’ but poses problems
Addressing the issue of small pension pots resulting from automatic enrolment was broadly welcomed by Richard Parkin, head of retirement at BNY Mellon Investment Management.
“In principle, offering consumers a choice of their workplace pension provider and the chance for continuity seems sensible and provides the opportunity to have a clearer picture for retirement planning. However, we must recognise that many consumers are often ill equipped to make a choice of provider and there is a risk that they choose their pension provider based on the quality of marketing rather than the quality of the product.
“It is imperative that consumers do not sleepwalk into a long-term pension provider and instead