Budget 2025 reaction - webcast transcript

Hello and welcome to PwC Budget Reactions webcast.

I'm Lindsay Hayward, and I'm delighted to be joined by a fantastic group of colleagues who are going to help us unpack the impact of yesterday's budget announcements.

So I'm joined today by Barrett Kapalian, our UK Chief Economist, Gavin Barwell, Senior Advisor to PwC, and three of our tax partners, Ewan Friert, Paula Latori and Will Dawson.

Thank you all for joining me.

So this budget has certainly been one of the most anticipated that I can recall.

We've had weeks of headlines, leaks, press conferences and uncertainty, which has kept everyone on edge.

We even had the unprecedented situation yesterday of the leak of some of the chancellor's measures before she started her speech.

And we were seeing some market reactions before anything was formally announced.

And one of the impacts of all this speculation and uncertainty has been that a lot of business and personal decisions have been put on hold.

I'm sure many people like myself and I relieved that the budget is finally over.

And we're going to look this morning at whether these announcements mean that decisions can now finally be made.

So we've got a lot to get through, but we're going to try and keep this to just under an hour if we can, depending on questions.

We're going to start with the headlines from an economic and political perspective and then move on to discuss some of the key changes for business within our with our tax experts.

So as you're watching, if you have questions, please do submit them and we will keep some time at the end to move on to those.

So if we start with some of the economics and then this morning, Barrett, could I come to you first, please?

What are your, what's your immediate reaction to what was announced yesterday and whether we're finally seeing the right mix of measures to drive growth?

Morning, Lizzy.

So I think the budget was a was a story of two halves and and that becomes apparent if you look at the government's decisions on tax and spend over the the five year sort of forecast horizon.

So in the first period up until 20/27/28, government expenditure ramps up by 20 to 40 billion depending on which year you look at.

And that spending mainly goes to welfare spending.

So it's with respect to the winter fuel bill, you turn the second child benefit cap removal and that's funded in part by borrowing and in part by additional tax revenues.

So in this first period, it feels a bit like tax and spend or borrowing spend.

And then you've got the period after 20/27/28 where government expenditure still remains high, but you've got much higher tax revenue coming in.

The main source of that being the extension of the freezing of the income tax thresholds and by the end of the forecast horizon, the increasing tax revenues is so much so that it offsets the increase in government expenditure.

So what you end up with is a pretty chunky by historical standards or relative standards headroom.

So the second period feels a bit more like tax and save.

Now before the the budget, we, we sort of laid out the three questions or the three choices that that Rachel Reeves had to make for this budget.

The first one was will she go for a thick headroom or a thin headroom?

I think she has opted for a thicker headroom.

It's smaller than than historic standards, but it's double what we what she had last time around.

Will she lean on tax increases or spending cuts?

She's exclusively leaned on on tax increases.

And then will she go for sort of 2-3 big tax policy changes or sort of a scattering pattern approach?

Now she's opted for for the latter.

So a much more scattering pattern approach.

I mean, there were about 85 policy decisions announced yesterday and 75 of them were were new.

And let me just finish off with a surprising fact.

And then the elephant in the room.

So the surprising fact is that right before the budget, everyone thought that her headroom had vanished and that she would have started in the red and she would have had to feel a very quiet headroom.

But actually if you look at the Obr's numbers, she had a spare 4 billion to start off with.

So technically she could have gone to Parliament and and have done actually nothing.

Now the elephant in the room is that we didn't see anything tangible or substantial in terms of of the growth plans of of the government.

The OBR said that none of the policy measures had a sufficiently material impact on on potential growth.

So for me, what this really means now, now that the budget is out of the way, we really need to laser focus on the growth agenda for the UK economy, which is about, you know, implementing the industrial strategy, building many more homes and infrastructure in a shorter period of time.

The skills agenda, tax reform, AI adoption, public sector productivity, all these inherent challenges that we face that we need to tackle.

Now, the optimist in me says that now that we've got a higher headroom and that the government's intention is to have one fiscal event every year that gives you a bit more breathing space to deal with these issues.

The cynic in me says something different, but but the optimist in me says that thanks very much Barrett.

And we, we will try and keep the optimism flowing where we can throughout the the rest of the hour.

And very helpful.

I think we'll come back and touch on some of those points shortly as well.

But Gavin, if I could move to you for a moment.

And given the scale of the challenge on the chancellor's hands and, and all of the speculation and press and pressure in the run up to this budget, what's your political assessment of how successfully or not she's managed to to navigate this?

I think first of all, you're right to say the political context was really quite difficult.

Some of it what she inherited some of their own making maybe.

So I think in particular kind of pick out three things she said last year she wasn't going to come back and do another big tax raising budget.

So her opponents are clearly saying to her, well, you you've broken that promise.

Until a few weeks ago, she was out there very strangely for a chancellor kind of openly pitch rolling that she was going to increase the rate of income tax.

And then she did AU turn on that a couple of weeks ago and switched to whatever one's calling this small gas board strategy of lots of smaller tax increases.

I thought one of the interesting things that came out yesterday was the OBR revealed that the, the explanation she gave, she, she said that EU term was because the OBR had changed the forecast.

That's not true because we can see from the document now that the last forecast from the OBR was on the 31st of October.

So the numbers hadn't changed at the point which they they made EU turn.

And then thirdly, like the underlying growth context is difficult.

I mean, the, the one of the really difficult things to her about the OBR forecast is they've downgraded the growth forecast.

So all of those things made the politics more difficult.

But as Barrett said, she did have one bit of, if you like, not bad news.

I mean, even maybe slightly helpful news, which was the downgrade in the forecast wasn't anything like as bad as we were all expecting.

So as Barrett was explaining to you, actually what she's what she's done here essentially is to raise taxes initially to pay for higher welfare spending and then to give herself more headroom essentially so that hopefully we don't end up back here again next autumn.

And if you if you're looking for an optimistic note, that would be like the the thing I would major on, I think the risks of repeating the autumn are quite a bit lower.

Whereas in March she left herself with so little wiggle room.

It was almost certain we were going to end up having this discussion today.

I think then in terms of the decisions that she's made, there are kind of two political risks that I would draw to people's attention.

One is there is no doubt that her political opponents are going to say this is basically higher taxes to pay for higher welfare and in particular the the two child benefit cap, the decision to remove that, they will focus on that because the polling shows that even Labour voters agreed with that cap.

So although Labour MPs like what she's done, it's going to be a much harder sell to the public.

And then the second thing as Barrett's kind of already covered is the tax increases are deferred or most of them are deferred towards the end of the forecast period.

So she will be hoping that the economy, the predictions get better and she doesn't actually have to do some of these things.

But if that doesn't happen, she has now set herself on a political strategy where there's going to be big increases in taxes just before an election.

So that's probably the kind of primary political risk, I would say.

Thank you, Gavin.

And I think, as you say, some some successfully navigated issues for her there, but still some challenges to go.

Do you think this means then we're finally going to get some stability that everyone's been looking for?

Cross fingers maybe.

I think that the headroom decision, as I said, is a good one, that that was one of my kind of key tests of whether she was doing the right thing.

So I definitely would give her some credit for that.

I think the biggest risk to stability is actually a political risk, which is we've got a big set of elections coming up in May, Scottish Parliament, Welsh Senate, lots of mayoral and council elections all around England.

And at the moment the Labour Party looks like it's going to do very badly in those elections.

So the question is what is the political reaction to a very bad set of results in May?

And I guess there's two possibilities.

There's one possibility where the Prime Minister may want to change his chancellor as a way of showing Labour MPs he's listened to their concerns.

Or if the results are really bad, it could, it could provoke a kind of challenge to the Prime Minister himself, which potentially could then if it's successful, mean a change of chancellor.

So I think the biggest risk to stability actually in the in the short to medium term is the political consequences of whatever the election results are in there.

Thank you, Gavin.

I was almost nervous to ask that question because I don't particularly want to know the answer.

I think we would love the answer to have just been yes, absolutely.

We're going to get the stability that we all need.

And thank you very much, Barrett.

Gavin.

I think for now we're going to move on and look at some of the tax implications, but we will certainly be coming back to you a little bit later on.

So as Barrett had mentioned, a lot of measures and in this budget, £26 billion worth of tax rises and now most of that comes from personal taxes.

So I'm going to start with you.

Will, could you please share a few thoughts with us on some of the key announcements that we saw yesterday from a personal tax perspective and and how do you think your clients are going to be feeling after yesterday?

Yeah, thanks, Lindsay.

Yeah, I mean, as you said at the beginning, there was a lot of speculation ahead of this budget and in particular around personal taxes, probably the most we've ever seen.

And we had the rumours about inheritance tax and exit tax, EU turn on income taxes and all with this narrative around taxes on the wealthy, those who've brought his shoulders.

But actually in terms of what we saw as kind of a headline change, all we had was the 2% increase in basic, higher and additional rates on savings and rental income.

And so 2242 and 47% and then the 2% increase on the dividend income, but only on the basic and higher rates.

Oddly, the rate for the additional rate didn't go up.

So, so as you can tell, you know how carefully I've had to explain those rates just on that one piece there.

None of this is really simplified.

Personal taxes, you know, we now have nine different income tax rates, more if you include Scottish income tax rates obviously applicable for you there, Lindsay.

And, and, and as kind of alluded to, you know, we had 85 policy changes and it was those kind of additional smaller changes which weren't announced in the, in the Chancellor's speech, which range from incorporation relief or organisation provisions, anti avoidance, those sorts of things.

They're the things which I think will have the impact.

We were actually still getting press releases from HRC at 5:30 last night, none of the efficiency of the ABR doing it two hours in advance.

And of course that doesn't help simplify what is an already kind of crowded tax code.

And and we still need to look through some of that detail.

You know, we're still going through with 85 different policies.

We really have to think through what that means.

But overall, you know, I think that the positive you would take from it and many clients are is, you know, we haven't seen changes to capital gains tax.

We haven't seen any further significant changes to the non Dom regime and inheritance taxes as stays as is.

So definitely some stability there.

I would say in in no changes to those rates.

Thanks, Paul.

So good to take the positivity in that the the stability coming out of what hasn't changed.

But as you say, we're definitely not seeing more simplicity and, and, and lots and lots of things still to work because you say being released yesterday evening as well.

So if we look back to last year's budget and the joy that came out last year, it was more employers and business that took the majority of the burden there and we had unexpected rises in employers, National Insurance.

And Paula, can I come to you to maybe share some thoughts on the employer's perspective after this year's budget?

Sure.

Thanks, Lindsay.

I think it's fair to say many, many employers were bracing themselves to hear the budget yesterday, especially like you say, what happened last year.

And the Nic increase we saw was just completely out of the blue.

But, and, you know, the outcome of that has been that a lot of employers have been putting key decisions on hold in terms of, you know, transformation, hiring people.

And before we got to the budget yesterday, we did have the national minimum wage increases confirmed on Tuesday evening, which the headline rate for those aged 21 and over went up by 50 pence per hour.

But the larger increases were actually for the younger workers.

So before we started to hear the provisions yesterday, we had a lot of employers who already knew they had an increase in their employment costs.

So, you know, it there was a case of, you know, where would we go with the Nic changes for pension, salary sacrifice.

So when we heard that actually the effective date for that change isn't until 2029, I think it would have been a welcome relief.

Yeah.

So, so some good news for our younger workers, as you say, but but definitely a theme of rising costs for employers and probably not a huge surprise and knowing the gap that we had to fill, but any surprises this time around from an employment perspective?

Yeah.

And like you say, the Nic relief change on the pension salary sacrifice was well trailed and it, it was confirmed that the cap of 2000 lbs, which I know speaking to quite a few people that there's a question around why 2000?

But when you consider the Labour government speak about a working person, an average income of 40,000, the auto enrollment percentage contribution for that level is 5%, hence giving us the 2000.

But you know, we shouldn't forget that there is tax relief on the whole amount of pension salary sacrifice and those pension contributions, sorry.

And, you know, and there I think a little while ago it was speculated whether the higher rate tax relief would be removed, which it hasn't been.

So that's that's positive.

And given we've got, you know, a number of years before this is introduced, it gives employers breathing space to really understand the impact.

And let's not forget, they've also got to deal with the implementation of the Employment Rights Bill, which we didn't really hear very much about yesterday, but we know that, you know, that's coming down the track.

And the other thing is, although there is the reduction in Nic relief for many, IT salary sacrifice of pensions and broader salary sacrifices are actually still very effective.

There will be large cohorts of employees who won't be affected by this, albeit there are a number of variables that play into that.

And if we want to flip it on its head, you know, we are aware of some employers who don't already have this in place.

We now have certainty around, you know, the government's view on this type of arrangement because there have been consultations in the past, which has provoked nervousness.

So if we have employees who don't have it in place, there's the opportunity to actually implement now.

And for some employees, it might be consideration of broader arrangements, which can create, you know, additional savings for employee for the employer and also will be to retention of employees.

But it comes with the let let's not forget the complexity involved.

And, you know, they those shouldn't be underestimated And some of the broader aspects around, you know, if we already have employers who are sharing savings, will these changes impact what they want to do as their reward policy?

So we have the time to really step back and understand the impact and, you know, carefully think about what we want to do here and really, you know, think about is there a different approach needed more generally for for reward, which we all know that employers one of the biggest profit and loss cost for many employees is people cost.

So we have a little certainty into the future which will allow that to be reviewed.

Yeah, thanks Paula.

And and as you say, it is a very large cost for businesses and we've seen the impact of some businesses over the last year, certainly in the press after last year's budget.

So a lot in here for for businesses to get their arms around and especially after last year's changes, unemployment rate bill, as you say, and they're going to need a little bit of time to digest and plan and, and maybe some of the timing of these rules is going to be perhaps helpful.

Here it is.

But the one thing that we shouldn't forget is when we start to consider we've got an increase in national minimum wage that may immediately take cohorts of employees out of salary sacrifice from next April.

So although there's the breathing space for the bigger change, we need to be careful for those populations.

And that, you know, will increase cost, decrease take home pay potentially for some individuals.

And there were some other measures announced yesterday in the budget, which again, we shouldn't forget about.

They weren't headlines, but they were buried in the in the information.

And some of it is simplification.

There's been a bone of contention for a number of years with employment tax folk around how the treatment of certain benefits are treated.

We've got confirmation of that coming in from next year.

We've got a slight tweak as well where we have international employees where we need to think about the work, the overseas work day relief because there is a capping of what can be taken out of page one.

And then the final point really I wanted to make and it came through a number of times in the speeches around enforcement.

And you could see that she was talking about revenue generation, both from the tax increases, but by, you know, the enhanced enforcement.

And she spoke about national minimum wage, She spoke about Fair Work, Fair Work agency, sorry.

And we we know that they're going to start to use the sanctions of significant penalties and public naming.

So employers do have a window to really get their house in order and understand the rules and ensure that the governance is in place.

So supposed to summarise, you know, there's no real big surprises in that, but we do know that there are going to be certain sectors that will be more impacted than others.

So for example, and if this really mirrors what we saw last year, when you think about the employee profiles for sectors such as hospitality and leisure and retail, they may feel the cost more than.

Some of the others, so it could be quite a mixed time and I think so thank you.

Thank you for that Paula and you and maybe were thinking then about sort of broadening out.

So we've talked a bit about employment costs and what that's going to mean for the for businesses.

But more broadly for businesses, what are the other sorts of many lists, long list of small changes, but also some sort of commitments and consultations.

What does all of this mean across tax more broadly for larger businesses?

Yeah, thanks Lindsay.

And maybe if I actually pick up from Paula's last comment there about no big surprises, but but sector specific implications, I think that's absolutely right.

Picking up your point that there have been, there have also been lots of small changes.

So I, so I do think no big surprises, but certainly, certainly some detail to get into on this if I maybe start big picture.

So I do think the key headline is 1 of relative stability in the business corporation tax, tax world.

And that's probably best illustrated by the, the continued commitment to the corporation corporate corporate tax road map and what that really means, I guess 2 main things there.

The corporation tax rate remains unchanged.

And really importantly, I think the key incentive regimes in the UK have all been maintained.

So in particular full expensing for most capital investments, which which is a really important incentive for for capital intensive businesses.

So all of that I think is a signal that the the government is remains committed to that stability that that it brought in, in the the road map last year.

So, so I think that's, that's pretty good news overall around around the stability, stability factor.

And there was a revenue raise on the corporation tax side, which was a change to the rates of capital allowances on certain capital expenditure.

But I think that was, you know, fairly minor in the grand scheme of things.

So, so I do think the big picture message here is stability overall for business and, and I do think that's really important.

Having said that and and picking up some of the the theme and part of what what you asked there, Lindsay is that there is quite a lot still quite a lot of devil in the detail here.

So you mentioned there's been several consultations released or maybe pick out two, I mean one of them invoicing.

So the requirement to to issue all invoices for that purpose is electronically by 2029 that, that will be a big change for business and one that businesses should start, start preparing for.

So, so, so there's quite a lot in that for most businesses actually there are various other consultations and maybe I'll just pick out one because we're talking mainly about large business here and many large business will have an international presence.

So transfer pricing consultation is well worth a look at.

It was expected mainly I would say it's simplification, but it does come with quite a lot of changes and indeed they also some additional compliance requirements now on transfer pricing.

So really I'm saying under this overall message of stability and high level, no big changes.

But I really do think businesses should pay attention to, to all of those announcements, those consultations that have come out because there's quite a lot of detail in that.

So again, going maybe a little bit deeper under that, that overall headline of stability, I guess I'll make 2 further points and I'll pick up the sector specific point referred to.

Firstly, referring back again to what others have said as well, There wasn't actually that much simplification.

I think it would have been great to see more simplification because that really is something that could encourage, encourage economic growth.

We saw it in in parts, but a lot of it was actually additional measures for business and therefore very, very little simplification, which was a shame in some ways.

But I think it's worth making the point that there wasn't very much of that.

Secondly, again, this is a devil in the detail point, but there were a lot of changes as alluded to.

So it will really be important for businesses to get into that detail of what it means for them beyond the beyond the headline.

So both the immediate changes, but also the knock on implications of those changes on business decisions.

And if I apply quick sector lens to that, I think there will be some sectors that will be maybe a positive and maybe a little bit relieved there weren't more changes.

And probably banking springs to mind there because there were some rumours in the in the build up to the budget that there could have been some changes in that space.

We didn't really see any additional changes there.

So I think, I think sigh of relief may be in the, in the banking sector.

On the other hand, maybe I'll pick out the energy sector.

I think be less enthusiastic about the budget given that there were suggestions that there could be positive changes, for example, to the energy profits levy and and the industry did hope for that.

But we, we don't see that.

So we know, we know, we now know that we carry on until 2030.

What we do know is a little bit more around what will follow the energy profits levy with the the energy price rate mechanism that is being consulted on.

So perhaps a little bit of certainty, but I think the energy energy industry will generally not not see it so positively.

I could pick out many, many other sectors, but maybe if I just very quickly pick out three, there were obviously gaming tax changes.

So that will have a big impact.

There were several business rate changes.

So, so certainly retail, hospitality, leisure sectors will be very interested in that.

And even if a bit more specific, even there was a land the landfill tax consultation outcome.

So those are just a few examples.

But really what I'm saying is there's a lot of detail actually in this.

And as we alluded to earlier, there was still a lot of information coming out in the early hours of the morning.

So under this banner of stability commitment to the corporation tax system, which I do think is the key headline, I do think there's actually quite a lot of work detail to work through, whether it's looking at the consultations or actually think of it sector by sector to, to, to work out what the tax, the, the very detailed tax changes really, really do mean for companies.

Yeah, thank you.

And huge amounts of detail in there, as you say.

And, and certainly interesting from a sector perspective, no significant winners or losers, but lots and lots of ups and downs in there for people to work through and quite a few secondary order impacts as well.

I think that I know some of our colleagues are working too with clients at the moment.

And so if we maybe move away from large businesses for a moment and well, if I come back to you thinking about the overall announcements and and the the kind of desire and the need to drive growth for privately owned businesses to encourage growth and scale UPS, there's some positives we can take out.

I know you like to be optimistic.

Are there some positives we can take in here around supporting that both agenda?

Yeah, look I think I think they certainly are and it does feel like there was a real nod to to want to encourage to encourage investment and growth with some of the announcements whilst we there was a reduction in the CGT relief available for transfers to play employee ownership trusts.

So the kind of John Lewis light model, if you will, from 100% to 50%.

There was then the positivity of increases in the enterprise management incentive scheme and that allows private companies to tax efficiently, give equity to employees.

So maybe slight counterbalance to some of the salary sacrifice stuff.

And alongside that we had the expansion of the ERS and BCT regimes which will be welcomed.

You know, it's a way to encourage investment in startup and scaling business here in the UK.

We also we're we're kind of pleased to see the announcement of a consultation on how to support entrepreneurs via the tax system and the incentives within it.

You know that that definitely feels like a step in the right direction.

I think the difficulty will be with the tone already set the previous budget and things around changes to BPR.

You know, some of the entrepreneurs, private business owners may take some convincing that that, you know, the government is willing to to listen.

You know, you can offer a consultation, but if you haven't listened on other things, you know, how much do you really think that's going to influence?

But the biggest thing I think it's, you know, others have said before, it's over, it's done now we hopefully have got some stability.

And I think, you know, for a lot of private business owners that will hopefully mean that they can start to plan with a bit more certainty.

And in addition, I think which Barrett referenced earlier on, you know, with that increased headroom, it hopefully will give people confidence that there won't be kind of further tax changes.

So then we can start to build that kind of picture of positivity.

Yeah, thank you.

And I think so important, I think everybody is wanting more certainty after particularly after the last year.

I think it's really been impacting a lot of business decisions as we said at the beginning.

So love to be in the position where everyone feels they can take more decisions, feel, feel more certain going forward and plan with a bit more confidence.

So maybe a good point for us to take a pause in terms of thank you to all the speakers for for talking through everything so far.

And we've had some questions coming in.

So thank you to those of you who have submitted so far.

Please do continue to submit those.

I am going to go.

There's a quite a long selection, right?

Where do we start?

I think let's start with this question about the headroom which we've touched on once or twice.

So there's a question around the the level of the headroom being created, What are the key risks that could eliminate this?

So Barrett, can I come to you for that?

OK.

So I think so the chancellor has opted for a a 20 billion headroom.

Now if you compare that against the the two previous fiscal events, the headroom was about 10 million.

So it's, it's double, double what she had budgeted for historic compared to the two previous fiscal events, historically chancellors have have opted for a higher number about 2827 million.

So it's, it's higher than what we had in the past 12 months, but it's, it's lower than what historically chancellors opted for.

Now a few things could could sort of eliminate or erode this headroom.

There's useful scenario analysis that the OBR carried out, which emanate from risks in the global economy.

The first one is dealed yields are higher than expected, so by about 100 basis points.

And in that scenario, most of the headroom is eroded, but there's still some left at the end of it.

And then the second scenario is 1, where you get a correction in U.S.

equity prices, which then trickles through into into the UK markets and has an impact on public finances there as well.

In the second sort of scenario, again, most of the headroom gets eroded, but actually there's quite a lot of judgements around, you know, the size of that shock, the duration of that shock and the timing of that shock.

So it's a bit more of a difficult sort of situation to predict.

Now, if you ask me which one of the two scenarios is more likely, I think it's probably the first one, guilt yields maybe being a bit higher than what we expect.

And that's because of international factors.

Really what we're seeing across advanced economies is this fiscal renaissance, you know, government spending much more than they, they have historically, which could try out capital and push up yields faster and higher than than we we expect.

And then there's also one final point, I think around the headroom, which is this scepticism around whether actually the tax receipts will come in towards the end of the forecast horizon to bump up the headroom.

Now what I would say there is that most of that those tax receipts will come through the freezing of the income tax thresholds.

So it's not a new tax, it's an, it's the continuation of this existing policy.

So that gives it a bit more of an air of credibility.

I think those are the points I'd like to make on on the headroom point.

Thanks Barrett.

And I think where I'm going to go, I'm trying to trying to skim through lots of lots of interesting questions in here.

And there's another one around whether we've done enough or whether the Chancellor has done enough to make the UKA more attractive place to invest.

And So what was there in the Budget by way of incentives for business, for example?

So maybe you and if I could come to you first on that one and Gavin, I may come to you for a view as well.

Yeah, great.

Thanks Lindsay.

So maybe I'll cover the top side of things in the first instance then.

So, so I guess I would say it's hard to find anything major, isn't it?

I think there's there's there's probably some glimmers of things in there.

So I'll pick up four example we haven't mentioned, but there was the consultation on the gets the outcome of the consultation on, on how you could get funds clearances for major infrastructure projects.

So that there are there are a number of things like that where we have a bit more certainty.

And clearly the the government is trying to do certain things to encourage investments.

So, so I can certainly see some little sparks like that which which suggests they they are keen to find tax measures that encourage and encourage economic growth.

But I think overall it, it comes back to really what we summarised and summarised on the webcast to, to, to date, which is there, there were no major positive changes and there's lots of smaller changes with with a bit of detail.

So there will be some winners, there will be some losers.

Certainly I don't think there's been anything fundamentally damaging in there, which I think is a really good thing.

But equally, I I can't point to any major, major tax policies that would encouraging economic growth.

It somewhat depends on your starting point.

I, I personally would say no damage is probably better than could have been expected in some quarters and therefore I would say it's not bad overall.

Thank you.

And Gavin, do you want to add anything to that as well?

Yeah, I agree with that.

There's a, there's a paragraph buried in the OB Rs analysis where it is actually nothing in the budget is above its threshold of either adding nought .1 percentage points output or or taking away nought .1 percentage points from output.

So there's nothing substantive either way in the measures.

So I think really the key thing to think about is what does this do to sentiment?

Because if you look at actually, if you look at our economy this year, it grew quite strongly in Q1 and Q2 and then it kind of has ground to a hole in Q3 because everyone was worried about what she was going to announce yesterday.

So sentiment is often as important as the detail of policy in, in terms of what actually happens.

And so I think if you, if you, if I was taking your instruction to look on the optimistic side, I would be thinking first about does the message that she's got out about the increased headroom lead people to believe we're not going to be back here again next autumn and therefore, we can begin to move forward.

And there were, there were bits of detail in there that caught my eye where on those issues where government has some influence over bills, rail fares, electricity bills, prescription charges.

She was doing things to try and reduce inflationary pressure.

And she's doing that, I think, to try and make it easier for the Bank of England to cut interest rates.

So if we were to get an interest rate cut in December and then maybe another one early in the new year, that might help boost sentiment as well.

And I suppose you've got to set that against the fear that some people might have well, you know, she's increased taxes in the first two budgets.

Is she going to come back and hit us again?

So it's AI think the key thing to kind of watch is how that sort of sentiment battle plays out over the next six months or so.

Thanks.

Thanks, Kevin.

And Paula, there's a few questions on the 2K cap.

I don't suppose you would mind just going back to that one, just a little bit more detail if you don't mind.

No problem, Lindsay.

So basically from April 2029, any salary sacrifice, pension contributions above the threshold of 2K will be subject to when I see both employee and employer, where at the moment it isn't.

So salary sacrifice will continue to exist.

You know, tax relief will continue to exist.

We've done a number of calculations as you can imagine, to think about how is it going to impact the different level of, of, of employee.

And when you, when you start to look across the boundings and knowing that you know how Nic rates actually decrease as earnings increase, where you've got somebody who's earning about 50K, the savings reduction is about 20% for both the employer and the employee.

When you get somebody who's at 60,000, the cost to the employer is actually higher because the Nic rates are higher, but the the decrease in savings is 33%.

And then we can get to somebody at 105 K, the decrease is actually 62%.

So, and, and again, very much on the employer.

So, you know, as you can imagine, we're, we're hearing employees say, well, how does that work if I just reduce salary and give a pension contribution instead, that isn't salary sacrifice.

So as you know, part of the detail here is really understanding the contractual setup, the documentation and how it flows through, but also not forgetting the wider implications because actually what's it mean for all the benefits or, you know, both within the business or elsewhere and operationally as well, you know, where the cap has been implemented here, how are our payroll systems going to deal with it?

And also that as people move through bands, you know, in different times.

So this is where there is there is a lot of complexity for something that actually sounds quite simple.

Thanks, Paula.

A couple of questions coming in.

Gavin, I might come back to to you with this one.

There's a question saying to what extent do you anticipate that the mansion tax is the thin end of the wedge opening the gates for Labour to introduce more wealth taxes over the budgets ahead?

And I would probably link that with, there's a few questions around, is the government just kicking the can down the road with some of this when you look at the timing of things?

So sorry, I probably like rolled 2, two or three questions into one there for you.

But it's a little bit about actually, are we just seeing small measures now?

But we, we've have the sort of terror of further greater ones to come.

I have a bit more sympathy with the second critique than the first one.

So, you know, for the reasons you were saying, I think you could definitely say this budget was basically about fixing the kind of political hole that she was in and keeping the show on the road.

It wasn't addressing the underlying challenges we've got in terms of driving growth.

Barrett hinted at the same thing in his introduction.

I think that is a, that's a pretty fair critique.

I think if I can't rule out that she will come back for more on wealth taxes at some point in the future.

But I think it's unlikely for two reasons.

One, if you look at what she's done in her first two budgets, she's raised something like £60 billion of taxes.

So it's quite noticeable that having had to raise £60 billion, she hasn't increased the bank levy and she hasn't introduced the wealth tax, which plenty of people in the Labour Party would have wanted her to do.

So that says to me she thinks there are reasons why those would not be good things to do.

They would be measures of last resort rather than near the top of the priority list and I think.

Always chances of the exchequer have to balance the political pressures on them from their own supporters with the need to keep the economy growing well.

So I think what we can read into what she's done is she doesn't think higher taxes on banks, Oregon wealth taxes are necessarily good ways of raising money because they would have negative economic consequences.

And I pick up a little bit that the Treasury is a bit nervous about the impact of some of the changes it made to the non Dom regime and to inheritance tax have had on the attractiveness of the UK's people.

So, you know, it's possible.

And if you had a change of Prime Minister and a more left wing Prime Minister and a more left wing chancellor, certainly it could happen.

But I think what we've seen in the last two years suggests that this chancellor is pretty reluctant to do those kinds of things.

And just to jump in there, Lindsay, as well on on the wealth tax, I think that there's a sort of a practicality point as well.

When you look at some of the, the options for raising taxes, you know, one of the things that's that's often raised with the wealth tax is the practicality of bringing it in and actually collecting it.

You know, having to value wealth companies, etcetera, requires a lot of effort.

So I think when when looking at new taxes, that's often a really key thing that any chancellor will have to kind of balance.

And perhaps whilst it's politically something they might want to do, the practicality may be just too hard for the the taxes raised.

Yeah, thanks.

Well, and I think we're, we're pretty much sort of coming to being out of time, I think for questions.

But but maybe you've you've touched on a point there.

And maybe one last question then around this balance of, you know, has the Chancellor been listening to businesses, to sectors, to to concerns?

And she's trying to balance the fairness in some aspects with, you know, encouraging the growth, but at the cost of simplicity.

So we've seen so much complication in here in and there's a lot coming through in the in the questions here.

And, and well, I don't know if you any more thoughts on that around where we've landed on that balance of simplicity versus stability, I guess.

Well, yeah, I don't think we've landed.

I think we've crashed and fallen into the sea.

If you were going for for simplicity, I mean, a nice dramatic place to finish.

Yeah, a positive note to fall.

And I've got to fly home from Belfast today.

So let's hope that doesn't happen.

But no, I think the the issue is it has become so complex now and many a government has not kind of grasped that nettle.

And I think the difficulty is, is the politics of it.

I mean, as I, as I said, we've got 9 income tax rates now, which if you were starting a tax system from a fresh, you just wouldn't do and you wouldn't have the National Insurance kind of piece alongside the difficulty with changing that.

And there's a lot of sense economically, you know, in terms of administration is the politics, because they'll always be winners and losers.

And I think that is really difficult to do.

And, and, and maybe the short term nature sometimes of our parliaments, etcetera, means that people just don't want to do it.

It won't be on their agenda, you know, so I it, it really needs to come.

I, I've, you know, I find it difficult to see any government will.

But, you know, we can, we can keep and maybe in the consultation with entrepreneurs, that's something we can kind of put forward.

But, yeah, and I'm sure Gavin probably has a, you know, another view on that.

But I, I think it's the politics that will always stop that.

I'll be amazed if if we see it.

Yeah.

I'm just literally 10 seconds.

I think the frustrating thing is the kind of government that should be able to do that is one with a huge majority.

And I think for a lot of people, whatever their personal politics, you would have hoped this government get, you know, wins a landslide victory, could tackle some of those things.

But it's very quickly ended up in the kind of psycho drama we had under the under the previous government.

Yeah, sadly, we are not in a position to wish for that at the moment.

And Brian, thank you very much for answering all these questions.

To anyone else who's asked a question that we haven't answered, we will collect all of those and get back to you separately.

But maybe just before we we come to wrap up one, one last question for each of you then.

And what do you wish was in the budget yesterday that we didn't see?

And, and Barrett, if I come to you first, I mean, I would have loved to see a more detailed time bound strategy on the growth agenda, which is the #1 mission of the government.

We know what our inherent economic challenges are and we just can't respond dealing with them any longer because you know, if we, if we end up in that situation, we're in 12 to 24 months time, we'll probably have the same discussion again.

Thank you, Kevin.

Well, if I can't say growth because Barrett said that, I would go with defence, right?

Every political party in the UK is telling you that in the next Parliament they're going to increase defence spending from 2.7% to 3.5% of GDP and none of them have got a clue how they're going to pay for it.

Yeah, that's, that's a slightly terrifying thought, isn't it, to carry forward.

But absolutely agree.

Well, I mean, I think from a private business perspective, the key things would be no kind of rollback or no changes of significant changes on business property relief or agricultural property relief.

You know that that shows that as much as the government says they want to listen to entrepreneurs, they aren't really listening.

Yeah, Paula, I think it would be something on skills.

There was an announcement yesterday about £1.5 billion investment and you know, from an employee's perspective, there was REC, there was suggestion of simplification of the apprenticeship levy which many businesses pay but don't feel they get value from.

So it'd be great to see that that actually happens and it'll support, you know, skills for the future.

Yeah, thank you.

And UN finally, last but not least, yeah, well, we've said it a few times, but I'm going to go with it again, simplification.

So I, I think there's a real opportunity to do something in that space to, to really simplify the code and really encourage economic growth as a result.

That's a good one to finish on.

Thank you.

And we can all hope and wish for that, can't we?

Certainly a good time.

So thank you all very much for that.

I'm going to bring this to a close now.

And there's been a huge amount of debate and the run up to this budget about whether we would see some very big bold step changes and and perhaps some breaking of the the manifesto pledges or lots of smaller changes.

And very clearly, we have landed in the last camp of seeing lots and lots of changes, but some significant tax rises in there as well.

And despite the scale of challenge on the Chancellor's hands, I think we've managed to and in the last 45 or so minutes and pull out some positives from the announcements.

Definitely a sense of relief that the budget is actually over, although still lots to work through.

Probably a relief at some of the things that aren't in there and just as much and certainly while perhaps a lower impact on some of the businesses than we've already feared and definitely compared to last year, there is still a very high tax burden, unadministrative burden for business in the UK.

So absolutely we saw focus on fairness, which may have driven the number of changes, but but at the cost of simplification.

So we've packed a lot into this webcast.

And if you would like to see any more detailed analysis of the announcements, then we will be putting and have already put some more materials and insights on our web page.

So pwc.co.uk/budget and and also on our Knowledge Navigator platform.

If you have any questions, please do reach out to your usual contact at PwC or to any of the speakers today.

And thank you very much for joining us today, and thank you to my colleagues for sharing their thoughts on the budget announcements.