John Healey stood up at half past twelve today, once Prime Minister's Questions had run its course, and delivered his first budget as chancellor. Last week I wrote about why I turned down the Budget breakfast: the tweed along the back row, the bacon sandwiches, and my suspicion that nobody's position was ever improved by a slide. Having said all that, I could hardly sit down this afternoon and churn out the traditional budget note. So this isn't one.
By three o'clock every decent newspaper worth its salt had a calculator on its website. Put in your income, say where you live, married or not, any benefits, and it gives you a plus or a minus for how the chancellor has treated you. Times Radio and Radio 4 had the leading economists and tax specialists in the country queuing for the microphone. Somebody in New York told us what it all meant for bond yields. And every politician with a pulse was clamouring to get in front of a camera (technically behind the microphone, otherwise it won't pick them up, but you take my point).
I could write that article. I have before, and with the tax specialists we have at CBSL Accountants we're more than capable of it. But we believe in personal service, and personal service means telling our clients what they'd like to know, not telling a non-smoker what's happened to the price of a packet of twenty. Anything we do write is written by us, too. A lot of firms belong to national groups and buy their content in, which is fine if you haven't the resource to do it yourself, but it's written for two hundred practices at once and generalised by design. Ours isn't.
I keep coming back to a picture. A business like yours, or mine, is a little boat on a big sea. We can do what we like with the motor and the sails, and we can make sure we're pointing in the right direction. What we can't do anything about is the headwinds and the currents, and those come from what's happening in the world, not from what was said in Westminster this afternoon.
Which is perhaps why the papers had him down, all week, for a nothing-to-see-here, steady-as-she-goes budget. A war in the Middle East has pushed up the price of energy and the price of money, and a chancellor in a small boat has the same problem the rest of us have. He just has more people watching him steer.
So the only thing I was really watching this afternoon was the gilt market. Last week I borrowed Jessica Cook's line in The Times that the speech is theatre, and that the arithmetic the Office for Budget Responsibility publishes the moment the chancellor sits down matters more than anything he says standing up. Today was a fair test of it.
The UK owes £3,005 billion. Public sector net debt went through £3 trillion for the first time at the end of September, which is 94% of everything the country produces in a year. The interest on it came to £10.9 billion in September alone, the highest September figure since the monthly records began in 1997, and £60.8 billion for the first six months of this financial year. Call it £10 billion a month. And we're still adding to the pile: £24.5 billion borrowed in September, nearly £98 billion since April. The ONS figures are here if you'd like to check my arithmetic.
Every time the people who lend us that money decide they'd like a little more for the privilege, the monthly bill goes up, and there's nothing a chancellor can do about it on the day. Ten-year gilts were yielding around 5.35% this morning. Earlier this month the long end touched levels last seen in 1998, and this week the Treasury sold five-year debt at the dearest rate since 2008. That's the headwind, and it doesn't much care what's in the red box.
What the gilt market wanted to see was headroom: how much room he had left himself against his own rules once the OBR had done its sums, and whether it was real money or a forecast nudged in the right direction. The City's view, roughly, was that something close to the £24 billion Rachel Reeves left herself would keep everyone calm and a good deal less than £15 billion wouldn't. If he landed it, the next twenty-four hours in the gilt market would be dull. Dull was exactly what I was hoping for.
I was more interested in that than in the profusion of small things and taxes. Plenty of people won't be, and that's fine; we can guide them through it easily enough.
So, the performance. He spoke for just under an hour. He opened with a joke about having hoped to be the most closely watched member of the government this week, until the prime minister went on Gogglebox, and got his best laugh with the line that this year's predictions of gloom had been about as accurate as the predictions of who would be chancellor. Then he settled into the refrain: "breathing space now, fresh hope for the future, delivered to the British people by this Labour government", used so often that by the end the benches behind him could have said it for him. He told the House that what we face are not economic headwinds but global economic storms, which we cannot wish away, only choose the course we steer through, and I'd like to think he'd read the first half of this before he stood up. He had rung President Zelensky that morning and been told "you've made my day", which is more than most of us can say about a budget.
On the numbers that matter: the OBR now says debt interest will cost £14 billion more this year than it expected in March, inflation averages 3.2% this year and 3.1% next and doesn't get back to 2% inside the forecast, and borrowing and debt are both higher in every year than they were in March, though debt is still falling by 2029/30, which is the year the rule bites. Headroom against the stability rule comes out at £14.5 billion (£15 billion, as he rounded it on his feet), rising to £22 billion the year after, and his line on it was that a buffer is there to be used when you need it and rebuilt when you can. The gilt market did what the City had asked of it. Ten-year yields dipped to 5.31% as he stood up, nudged back to 5.34% when he reached the headroom, and then went quiet. Dull, in other words. Good.
Then the profusion. Ed Conway counted ninety-eight separate measures in the Red Book, more than in any budget since at least Gordon Brown's day, from a chancellor who had promised us steady as she goes. £100 into the bank account of every household in council tax bands A to D this winter, gas standing charges scrapped from next year, VAT off electricity and 5p off fuel duty both extended to July, the cash ISA cut reversed, and three points on the bank surcharge to pay for it. The online council tax band checker fell over within minutes, which tells you which measure the country actually heard. Sky had Beth Rigby in the studio before he'd sat down, talkin' us through it; I've checked the Red Book, and not one of the ninety-eight measures provides for the missing g's. None of the rest needs me to repeat it.
Two things did matter for the people we act for, and neither got a cheer. The lifetime limit for business asset disposal relief halves from £1 million to £500,000 from April 2027 according to the Budget document, so a sale that completes before 6 April next year keeps the old limit, alongside a new founders' relief at 10% on gains up to £10 million for "the founders of our most successful firms", a lovely phrase that tells you nothing about who qualifies. And, almost in passing, he said he is changing the rules so that people taking profits out of their companies are taxed consistently, while protecting genuine commercial transactions and families passing a business to the next generation. That sentence is where the detail lives, and it's the one I'll be reading tonight.
Kemi Badenoch had the harder job, replying to a speech she had seen only in redacted form (the only numbers in it, she said, were the page numbers), and she took it at a run. The inheritance from his predecessor was a hospital pass. The resilience plan was three days of baked beans and a wind-up radio. The budget itself was four pence off a jar of gherkins: was that it? She welcomed more than she let on, including no rise in capital gains tax, the ISA reversal, the fuel duty extension and the smaller rise in the minimum wage for 18 to 20 year olds, and she read his own resignation letter from June back to him on the 3% defence target, which the spending review will now settle next year, before inviting him to resign again. But the best line of the afternoon on my number came from her side of the House: we now spend more on debt interest than on the army and schools combined, and we pay more to borrow than Greece, Latvia, Slovakia and, she couldn't resist adding, the Socialist Republic of Vietnam. Her verdict was a budget for getting by, not for getting on. Her alternative was £70 billion of spending cuts, half of it to the deficit and the rest to defence and tax cuts. Both front benches, you'll have noticed, spent the afternoon arguing about the interest bill.
From the chair, the Deputy Speaker spent the afternoon refereeing. One member was told he had let down the daughter who had made him promise, on the way to work, that he would behave. Others were asked what Baby Patrick would make of them. Another was warned that shouting for that long is bad for the throat. I said last week that the budget has enough theatre in it already. I'd forgotten the pantomime.
So: breathing space, as the chancellor put it, or a budget for getting by, as the Leader of the Opposition put it, depending on which bench you sit on. Steady as she goes on the big numbers, ninety-eight small things underneath. From the little boat, the weather didn't change this afternoon. The wind is still coming from the Gulf, not from Westminster.
Where clients have live transactions or live events, a sale in progress, a purchase, a restructuring, a succession plan half built, we'll go through this afternoon's announcements with them so they know how to deal with it, and then we'll react to anyone who needs advice specific to them. Personalised rather than generalised. It's just the way we prefer to work. If something in the speech touches your business or your family, give me a ring. The rest you can read on the way home.
Adrian Barker, CBSL Accountants
