Aviva comment on the Government’s “mini-budget”

Commenting on today’s “mini-budget”, Alistair McQueen, Head of Savings and Retirement at Aviva said:

“Today’s mini-budget was not mini.

The scale of action exceeded expectation and delivered the biggest set of tax cuts since 1972. The headline changes are summarised below:

• This year’s national insurance increase will be reversed in November

• The plan to increase corporation tax next year has been cancelled

• The cap on bankers’ bonuses is to be abolished

• Stamp duty is being cut with immediate effect

• The 45% additional rate income tax rate is to be abolished from April 2023 (Not is Scotland as it has its own rates of income tax)

• The plan to reduce the basic rate of income tax from 20% to 19% has been accelerated from April 2024 to April 2023 (Not in Scotland as it has its own rates)

The Chancellor’s driving motivation is, as he put it,  to “turn the vicious cycle of stagnation into a virtuous cycle of growth”. Economic growth should bring prosperity to all, so this motivation is to be supported. But it has been widely acknowledged that today’s action carries risk. Tax cuts could accelerate inflation, thereby accentuating the cost of living crisis. And tax cuts funded by borrowing could bring additional strain to the public finances. These risks have been reflected in today’s movements in the equity, foreign exchange and bond markets.

For the advice market, the challenges and uncertainties facing savers raises the importance of our work. Today’s tax cuts, combined with the additional support for domestic energy bills, should provide some near-term financial relief for many households. But longer-term risks remain significant, and the importance of financial advice remains critical."