Author: richard

The new year is almost upon us and we’ll all be setting our resolutions for the next 12 months.

Perhaps you want to improve your diet, quit smoking, learn a new skill or hobby, or pick up an old hobby that you’ve let slide over the years.

But have you thought about improving your financial habits too?

The new year could be a perfect time to get to grips with your finances, so you can set yourself up to achieve your ambitions and achieve the financial freedom you want.

That’s why we thought it useful to highlight a few common mistakes that people often make when they’re trying to get their finances in order, so you can hit the ground running from day one.

Not setting goals
If you’re investing your money in a particular market or asset type, it’s important to have a clear idea in mind of what you want to achieve. For example, are you looking to reduce your tax bill? Are you focused on generating additional income?

Only by having a clear goal in mind can you measure success or failure, and make changes where necessary to maximise your returns.

Not managing your debts properly
Many people have debts and financial obligations, from mortgage repayments to paying off your credit card bill.

Staying on top of these commitments is one of the best things you can do if you want to put yourself on a firmer financial footing. Not only can it help you pay down debts and free up cash, it can also improve your credit score, so you’re more able to borrow money in the future, should you need or want to.

Not putting money aside for a rainy day
We can be hit with sudden and unexpected expenses at any time. Perhaps a costly appliance breaks down and needs replacing, or your home suffers serious damage that has to be fixed.

So it’s well worth being prepared, in case of just such an emergency, with a pot of money completely separate to any pensions or savings accounts that you can use if needed.

Missing out on compound interest
Compound interest means you effectively get interest on the interest, so if you invest a sum of money, it can snowball into a much larger amount over a period of time. However, you only benefit if you don’t access this money during this period, so if you’re tempted to withdraw from time to time, you won’t enjoy as much compound interest as you would do otherwise.

Not checking your credit score
It’s easy to avoid checking your credit score until you actually need to borrow money or apply for a credit card. But if your credit score is low, your application could be rejected, which could potentially put your wider financial plans into jeopardy.

With that in mind, it’s worth keeping an eye on it regularly, so you can address any factors that might be lowering your credit score, and therefore increase the chances of your credit application being accepted straight away.

These are small steps you can take to help you on the path to financial freedom, but they can each yield significant benefits and results.

If you have any questions about getting your finances in order for 2023, please don’t hesitate to get in touch with us, and we’ll be happy to speak with you.

“A week is a long time in politics,” as Labour Prime Minister Harold Wilson famously said. What, then, is two months? Or to be more exact, 55 days?

On 6th September, Liz Truss, having defeated Rishi Sunak in the ballot of Conservative members, became Prime Minister. She duly appointed Kwasi Kwarteng – a man dubbed Truss’s ‘political soulmate’ by some of the press – as her new Chancellor.
On Friday September 23rd, Kwarteng presented his ‘fiscal event’ to the Commons. It marked a complete change of direction from the Treasury orthodoxy of previous Chancellors such as George Osborne, Philip Hammond and Sunak himself. Growth was prioritised, as Kwarteng unveiled the biggest tax cuts in half a century.

‘At last! A True Tory Budget,’ was the Mail’s headline. The right-wing think tanks were unanimous in their praise. But several papers and pundits described the moves as a gamble: ‘Truss’s great tax gamble,’ was the Times’ headline.

It was a gamble which didn’t pay off for the Chancellor and his boss. As Kwarteng finished his speech, the pound fell below $1.10 for the first time since 1985. As we wrote our report on the fiscal event for clients, the pound was trading at $1.08, having at one point touched $1.03. The Bank of England was forced to step in and the fate of the Chancellor and Prime Minister was effectively sealed. Kwarteng resigned on October 14th – to be replaced by Jeremy Hunt – and Truss followed ten days later. This time there was no leadership election: former Prime Minister Boris Johnson reportedly had enough backers among MPs but withdrew from the race, leaving Rishi Sunak as the only candidate.

A second fiscal event had been planned for Halloween – October 31st. Given the tax rises and spending cuts which had been widely trailed, that would have been a headline writer’s dream. In the event, the new Chancellor decided to push it back to November 17th and upgrade it to a full Autumn Statement. He was, he said, prepared to make “politically embarrassing” choices – and insisted that the delay to the Statement was the best course of action.

The political background

Jeremy Hunt, the new Chancellor, has been the MP for South West Surrey since 2005. He has held various ministerial posts, and was defeated by Boris Johnson in the leadership contest held to succeed Theresa May. When Johnson resigned this year, Hunt again entered the leadership race but was eliminated in the first ballot, subsequently endorsing Rishi Sunak.

It must have been a bitter pill for Liz Truss to appoint him as Chancellor. She was publicly humiliated as Hunt stood up in the Commons and – policy by policy – fed her ‘plan for growth’ into the parliamentary shredder.

Jeremy Hunt is the UK’s fourth Chancellor this year: in case anyone has lost count, we have also had three Prime Ministers. But that is that: it seems inconceivable that there will be a challenge to Sunak before the next General Election, which must be held no later than January 2025. You would assume – unless Sunak chooses to ‘freshen up’ his team before the election – that Jeremy Hunt will remain as Chancellor. He will certainly be presenting his first Budget in the spring of 2023.

So, what were the pundits expecting from the Autumn Statement? ‘Tax rises and spending cuts’ was the simple answer. City AM’s headline on the morning of the Autumn Statement was stark: ‘The Taxman Cometh – Hunt to deliver toughest Budget in years today.’

Widely trailed were the confirmation of the increase in corporation tax and the freezing of the thresholds for inheritance tax and income tax. The amount of money that the Chancellor needed to raise was – depending on which paper you read – put at anywhere between £50bn and £70bn. City AM’s article put the figure at £60bn – suggesting that increases in council tax, an extension of the windfall tax on energy producers and increases to dividend tax rates and capital gains tax, could be on the way. Spending cuts were also forecast, in what several of the papers dubbed ‘a new age of austerity.’

The economic background

As we mentioned in the introduction, the pound slumped against the dollar following Kwasi Kwarteng’s speech. At the time of writing this section of our report, the pound was trading at $1.19: the FTSE 100 index of leading shares stood at 7,310. But there is clearly far more to the economic background than the pound and the stock market.

If one word defines 2022, that word may well be ‘inflation’. The day before the Autumn Statement, the Office for National Statistics (ONS) revealed that inflation had risen to 11.1% in October – a full percentage point higher than the previous month, and the highest figure recorded in 41 years.

Aside from the fact that we’re all paying more for our food and shivering in the cold, inflation also pushes up the cost of servicing the Government’s borrowing: in August, Sky News reported ONS figures showing that inflation had seen interest payments on Government debt ‘leap by 63% over the past year’.

Worryingly for the Chancellor, there was also news that the UK economy had contracted by 0.2% in the third quarter of the year. ‘Recession looms as the economy starts to shrink’ was the BBC News headline, with the Bank of England now forecasting a ‘very challenging’ two-year recession.

Add in the continuing war in Ukraine, tensions between the US and China and the slowdown in world trade – virtually all October’s economic indicators from China missed their targets and the port of Los Angeles has just had its quietest month since 2009 – and Jeremy Hunt faced a very challenging backdrop as he rose to speak.

How much would taxes go up? How would the markets react? Let’s look at all the measures he introduced…

The speech

Opening remarks
Jeremy Hunt began by acknowledging that many people are “worried about the future”, and although he insisted that “difficult decisions” had to be made, he said the Government would be “fair in our solutions” and “protect the vulnerable”.

Mr Hunt’s statement was accompanied by forecasts from the Office for Budget Responsibility (OBR), which predicts economic growth of 4.2% in 2022, but a contraction of 1.4% in 2023. Inflation, meanwhile, is tipped to be 9.1% this year and 7.4% next year.

Although the OBR now judges the UK to be in recession, Mr Hunt believes his plan will lead to a “shallower downturn”, and he cited stability, growth and public services as his three top priorities.

Personal taxation and allowances
What Income tax additional rate threshold reduced.
When From 6 April 2023.
Comment The threshold at which the highest earners will start paying the top rate of tax will be reduced from £150,000 to £125,140.

What Income tax, NI and IHT thresholds to be maintained for a further two years.
When Until April 2028.
Comment The Government will keep income tax, National Insurance and Inheritance Tax thresholds at their current levels until April 2028 – two years longer than originally planned.

What Dividend allowance to be reduced to £1,000.
When From April 2023.
Comment The Dividend Allowance will be reduced from £2,000 to £1,000 next year, and then to £500 from April 2024.

What Capital gains tax exemption to be reduced to £6,000.
When From April 2023.
Comment The Government will reduce the capital gains tax annual exempt allowance from £12,300 to £6,000 next year. It will then be reduced to £3,000 from April 2024.

What Stamp Duty to be increased in 2025.
When 31 March 2025.
Comment The Government had announced that the stamp duty nil-rate threshold would be increased from £125,000 to £250,000 in September’s Mini Budget.

However, Mr Hunt will only keep this measure in place until the end of March 2025, after which point the threshold will go back to £125,000.

The temporary position for the nil-rate threshold paid by
first-time buyers (£300,000 to £425,000) and the maximum purchase price for FTB Relief (£500,000 to £625,000) are also being reversed in 2025.

Business investment and taxation
What Employers’ NICs threshold to be frozen.
When From April 2023 until April 2028.
Comment The National Insurance contribution threshold for employers will be frozen for the next five years.

Meanwhile, the Employment Allowance will stay at £5,000, which means that 40% of all businesses will still not have to pay any NICs.

What Corporation tax to go up.
When From April 2023.
Comment The main rate of corporation tax will increase to 25% for companies with profits over £250,000. Companies with profits of £50,000 or less will not see an increase due to the Small Profits Rate remaining at 19%. The Government will introduce tapered relief for profits between £50,000 and £250,000 so that they pay less than the main rate.

What VAT registration level to be maintained.
When Until March 2026.
Comment The VAT registration level, which currently stands at £85,000, will be maintained at this level until March 2026 – two years longer than originally planned.

What R&D tax credits for small companies to be overhauled.
When For expenditure on or after 1 April 2023.
Comment The Government is to cut the deduction rate for the SME scheme from 130% to 86% and the credit rate from 14.5% to 10%, as well as increase the rate of R&D expenditure credit from 13% to 20%.

The Government believes rebalancing the rates of the reliefs will help to tackle fraud and deliver better value for taxpayers.

What Windfall taxes to be increased.
When January 1st 2023 to March 2028.
Comment Windfall taxes for companies in the energy industry will be increased from 25% to 35%.

The Government hopes its Energy Profits Levy will raise more than £40bn over the next six years.

What New Electricity Generator Levy to be introduced.
When From January 1st 2023.
Comment A temporary 45% tax is to be introduced for low carbon electricity generators, which includes firms that produce wind, solar and nuclear power.

The Chancellor believes that this measure, alongside the Energy Profits Levy, will raise £14bn next year.

What Targeted support to help with business rates.
When From April 2023.
Comment

The business rates multipliers will be frozen in 2023-24, while upward transitional relief caps will apply to firms facing large increases in bills following the upcoming revaluation of business rates.

The Government says its targeted support to help with business rates will be worth £13.6bn over the next five years, meaning almost two-thirds of properties will not pay any more next year.

What Changes to EU regulations to support growth in key industries.
When By the end of 2023.
Comment The Government will decide and announce changes to regulations in digital technology, life sciences, green industries, financial services and advanced manufacturing.

Mr Hunt said taking advantage of the UK’s Brexit freedoms in this way would support his ambition to turn Britain into the world’s next Silicon Valley.

What New approach to Investment zones.
When No date confirmed.
Comment The Government is to refocus the Investment Zones programme, announced in September’s Mini Budget, and existing expressions of interest will not be taken forward.

Instead, it will focus on leveraging the UK’s research strengths to “help build clusters for our new growth industries”.

The cost of living crisis
What Energy Price Guarantee extended.
When Until April 2024.
Comment The Government will continue capping typical energy bills beyond April 2023, though the cap will rise from £2,500 to £3,000 from April 2023.

What Cost of living payments for the most vulnerable.
When 2023-24.
Comment More than 8m households on means-tested benefits will receive £900 of support, which will be paid in instalments.

Meanwhile, pensioner households will receive £300 worth of support, and people on disability benefit will get a £150 payment.

What Extra support for people who use alternative fuels.
When Immediately.
Comment Support for households who use alternative fuels such as heating oil will double from £100 to £200.

What Cap increase in social rents to 7%.
When 2023-24.
Comment The increase in social rents will be capped at a maximum of 7% in the next financial year, which will enable the average tenant to save £200 next year.

What Uprate benefits in line with inflation.
When From April 2023.
Comment Benefits will go up in line with inflation, calculated at 10.1%. This means about 19m families will see their benefit payments increase from April next year. The benefit cap will also rise in line with inflation.

What Increase pension credit by 10.1%.
When From April 2023.
Comment The Government will protect the Triple Lock, which means pensioners will see pension credit and state pension payments increase in line with inflation.

The increase in pension credit will be worth £960 for a single pensioner and £1,470 for a couple. Meanwhile, the state pension will go up by £870.

What National Living Wage to increase by 9.7%.
When From April 2023.
Comment The National Living Wage will go up from £9.50 an hour to £10.42 an hour for those aged 23 and over.

More than 2m people are likely to benefit from the increase, which represents an annual pay rise of more than £1,600 to a full-time worker.

Other measures

Taxes on electric vehicles
What Vehicle Excise Duty to apply to electric vehicles.
When From April 2025.
Comment Electric cars, vans and motorcycles will no longer be exempt from Vehicle Excise Duty.

According to Mr Hunt, this will make the motoring tax system fairer and reflects the OBR’s view that half of all new vehicles will be electric by 2025.

Businesses will benefit from lower tax rates for electric company cars, with rate increases being limited to 1% a year for three years from 2025.

Public spending
What Public spending to go up, but efficiencies to be sought.
When Over the next five years.
Comment The Government will prioritise investment in the NHS, social care and schools.

The NHS budget will increase by an extra £3.3bn in each of the next two years, and schools will get an extra £2.3bn in 2023 and 2024.

Increases in departmental budgets will be protected over the next two years, with resource spending then going up by 1% a year in real terms over the following three years.

Mr Hunt says this means overall spending in public services will continue to go up, in real terms, over the next five years.

However, public spending overall will increase more slowly than the growth of the economy, and Government departments are being told to make efficiencies to deal with inflationary pressures in the next two years.

Adult social care investment
What Increased investment in adult social care in England.
When Until 2025.
Comment The Government will make available up to £2.8bn for adult social care in 2023-24 and £4.7bn in 2024-25.

Mr Hunt says this will allow the social care system to help deliver an estimated 200,000 more care packages over the next two years and put it on a much stronger financial footing.

Universal Credit
What More Universal Credit claimants to meet with a work coach.
When From September 2023.
Comment The Government will ask over 600,000 more people on Universal Credit to meet with a dedicated work coach, to help them increase their hours or earnings.

Mr Hunt says this reflects his commitment to assisting those in-work raise their incomes, progress and become financially independent.

Defence spending
What Defence budget to be maintained at a minimum of 2% of GDP.
When Immediately.
Comment Mr Hunt said that while both he and the Prime Minister “recognise the need to increase defence spending”, the Government must first revise and update the Integrated Review, which was written before Russia’s invasion of Ukraine. This will be completed ahead of the next Budget.

International aid
What Overseas aid spending to remain at 0.5%.
When Until 2024 at the earliest.
Comment Overseas aid spending will remain at 0.5% of Gross National Income (GNI) over the next year.

Although Mr Hunt said he is “fully committed” to returning to the Government’s target of 0.7% at some point in the future, he said this “will not be possible” in this forecast period, given the current state of the public finances.

Cutting carbon emissions
What Reducing carbon emissions by 68%.
When By 2030.
Comment Mr Hunt reinforced the Government’s commitment to reducing its carbon emissions by 68% by 2030, in line with the Glasgow Climate Pact agreed at last year’s COP26 conference.

The Chancellor said that given the “existential vulnerability we face”, now would be the wrong time to “step back” from its environmental pledges.

Funding for devolved administrations
What Additional funds for Scotland, Wales and Northern Ireland.
When 2023-24 and 2024-25.
Comment The Scottish Government will receive an additional £1.5bn over 2023-24 and 2024-25, while the Welsh Government will receive £1.2bn, and a further £650m will go to the Northern Ireland Executive.

English devolution
What New devolution deals with English regions.
When By 2030.
Comment Mr Hunt said the Government is committed to giving more local areas greater power and agreeing devolution deals with all areas in England that want one by 2030.

As part of this, a further mayoral devolution deal with Suffolk County Council has been agreed, and advanced discussions are underway with local authorities in Cornwall, Norfolk and the North East.

Nuclear power
What New nuclear power plant at Sizewell C.
When 2030 at the earliest.
Comment Contracts to begin construction of the Sizewell C nuclear plant will be signed in the next few weeks.

It is hoped the plant will begin generating electricity in the 2030s and help the country achieve greater energy independence.

Energy efficiency
What Doubling annual investment in energy efficiency.
When From 2025.
Comment The Government has committed to investing a further £6bn in energy efficiency from 2025. This follows the £6.6bn it had already planned to invest during the current parliament.

This will help the Government achieve its new target of reducing energy consumption from buildings and industry by 15% by 2030.

Infrastructure spending
What Freezing capital budgets for infrastructure.
When Over the next two years.
Comment Mr Hunt has promised that he will not be “cutting a penny” from the UK’s capital budgets over the next two years.

This, he said, will support ongoing infrastructure spending, such as upgrades to roads and railways, investment in broadband technology and improvements to public services such as hospitals.

The Chancellor said although this means the capital budget will not be going up as originally planned, it will still increase from £63bn four years ago to £114bn next year and £115bn the year after, and then remain at that level.

R&D investment
What R&D budget to be protected.
When By 2024-25.
Comment The Government has pledged to protect its entire Research and Development budget and increase public funding for research to £20bn by 2024-25.

Mr Hunt said this forms part of the Government’s “mission to make the United Kingdom a science superpower”.

Conclusion and reactions

Reaction to the speech
In the opening to his speech, Jeremy Hunt described his priorities as “stability, growth and the public services”. He made a commitment to “rebuild our economy” and said that “to be British is to be compassionate”.

At the same time, much of the blame for the country’s ills was laid elsewhere. The OBR confirmed that ‘global factors’ lay behind inflation: it was a ‘made-in-Russia’ energy crisis.
Wherever you lay the blame, two things are undeniable: we will all be paying more tax, and there has been a huge shift in Government policy, in the space of just eight weeks. Depending on your source, from £30-45bn of tax cuts, to £50-60bn of tax increases. It was hard to escape the feeling that whatever Liz Truss and Kwasi Kwarteng had promised to abolish, Jeremy Hunt had decided to retain – and increase.

Even traditional Government supporters found it hard to summon up enthusiasm for the speech. One comment in the Express was particularly revealing: ‘The silence of Tory MPs could not have been more stark if Jeremy Hunt had been reading out the list of the dead after a terrible catastrophe. Instead, the Chancellor was delivering a list of tax rises that would hit their voters more than anybody else.’ The Mail’s headline was simple: ‘Tax and Axe.’
For Labour, Rachel Reeves was as critical of this speech as she had been of the last one. “The end of 2022,” she said. “Three Prime Ministers, four Chancellors and four Budgets later and we find ourselves in a worse place than we started the year. Britain is a great country with fantastic strengths but, because of Government mistakes, we are being held back.”
Outside Westminster, perhaps the most telling comment – and certainly the one that most people will experience – came from Paul Johnson of the Institute for Fiscal Studies. He pointed to what he termed ‘simply staggering numbers’ in the OBR report, tweeting: ‘Real household disposable income per person set to fall by 7% over the next two years. The biggest fall on record, taking incomes down to 2013 levels.’

What of the right-wing think tanks who greeted Kwarteng’s speech so warmly? ‘Unhappy’ is an understatement. Mark Littlewood of the Institute for Economic Affairs said: ‘The Chancellor has put the UK firmly on track for higher taxes, more spending and lower growth. This is a plan for managed decline, not a plan for prosperity.’ Several commentators made the point that entering a recession with the highest tax burden ‘for three-quarters of a century’ might deepen the economic downturn, and lead to lower tax revenues in the long run.

There was significant criticism of the speech from the hospitality sector – a major employer in the UK – with one company executive tweeting: ‘This industry is now in crisis and this has, bizarrely, not been recognised in the Autumn Statement.’
Staying with social media, the Living Wage Foundation tweeted: ‘It is welcome that the Autumn Statement included an increase to the Living Wage – but it still falls short of the real Living Wage.’

How did the markets react? Certainly not as dramatically as after Kwarteng’s speech, that’s for sure. At the time of writing, the pound is trading at $1.18 – down very slightly on earlier in the morning – while the FTSE 100 index is at 7,316, virtually unchanged on this morning’s level.

Conclusions
Kwasi Kwarteng didn’t waste time in his first – and only – major speech as Chancellor. He spoke for just 25 minutes. Jeremy Hunt, in contrast, spoke for very nearly an hour, delivering what was to all intents and purposes a Budget speech.
“We won’t apologise,” said Kwarteng – and neither will Jeremy Hunt. Nor will he change course in the near future.

The Budget speech is unlikely to be well received by traditional Conservative supporters. We have seen the comments of the Mail and Express above and, writing in the Telegraph, Allister Heath said, ‘There’s no point to the Tories if all they do is surrender to the left.’

Looking at higher taxes across the board, and with the Chancellor describing dividends as ‘unearned income’, you suspect that many business owners will agree with him. Jeremy Hunt’s plan for ‘stability, growth and public services’ may be the right one – only time will tell – but it is unlikely to lead to a sudden bounce in the opinion polls.
Whatever your views and your political opinions, though, there is one indisputable fact about the Autumn Statement. With thresholds frozen, far more people paying higher rate tax and allowances reduced, the need for first-class, long-term financial planning has never been greater.

In 1990, only 1.7m people paid higher rate tax: that figure has steadily risen to 5.5m in the current tax year. With allowances now frozen to 2028, that figure could well reach 8m. With the threshold for top rate tax cut to £125,000, the number paying tax at the top level could approach 1m. Proper planning of your pensions and ISAs, making use of all available tax allowances, making sure estates are managed effectively in light of inheritance tax – all of these are going to be crucial in creating wealth and preserving it for future generations.

As all our clients know, we are committed to working with you and your family over the long term. Today’s Autumn Statement has only increased that commitment.

So what was it? A ‘fiscal event’? A Mini Budget? Or a full-blown Budget from a new Chancellor determined to take the UK in a very different direction from previous occupants of 11 Downing Street? As we will see in more detail below, reactions to the measures introduced by Kwasi Kwarteng on Friday September 23rd were sharply divided.

Saturday morning’s papers, though, were quick to deliver their verdict. ‘At last! A True Tory Budget’ was the Mail’s headline. ‘We’ve got the courage to bet big on Britain,’ said the Express. The gambling theme was repeated in other papers. ‘Kwarteng gambles on biggest tax cuts in half a century’ was the Telegraph headline, while the Times went with ‘Truss’s great tax gamble’.

Irrespective of whether it was a ‘fiscal event’ or a full Budget, there was a lot to digest. We’ve detailed all the measures below, but first, let’s look at the background to Kwasi Kwarteng’s radical measures.

The political background

In July 2019, Boris Johnson replaced Theresa May as leader of the Conservative Party and Prime Minister. Liz Truss, MP for South West Norfolk and a supporter of Johnson in his leadership campaign, was appointed International Trade Secretary. Lower down the ministerial ladder, Kwasi Kwarteng, the MP for Spelthorne, was made a Minister of State at the Department for Business, Energy and Industrial Strategy.

Five months later, Boris Johnson led the Conservatives to an 80-seat majority in the General Election on a promise to ‘Get Brexit Done’. His position appeared to be impregnable, but as we now know, he was forced to resign in the summer of 2022. The subsequent battle to replace him eventually came down to a straight fight between Liz Truss and former Chancellor – and early favourite – Rishi Sunak. Eventually, Truss won out, after endearing herself to Conservative members with a series of commitments to cut taxes.

She became Prime Minister on September 6th and, with the Queen’s death just two days later, also became the first Prime Minister to serve both a king and queen for well over a hundred years. Many people had expected Sunak’s successor, Nadhim Zahawi, to continue as Chancellor, but instead, Liz Truss opted for Kwasi Kwarteng – widely regarded as being on the right of the Conservative Party and a staunch advocate of tax cuts.

The death of the Queen, the national period of mourning and the approaching party conference season meant that the timetable for the fiscal event was shortened. Budget speeches are normally delivered on Wednesday lunchtime, after Prime Minister’s Questions. This time, Kwarteng delivered his package of measures on Friday morning, ahead of the Labour Party Conference in the last week of September and the Conservative Conference the following week.

The economic background

‘Neither a borrower nor a lender be.’ Many of you will know that famous quotation from Hamlet, but over the last two years, the UK Government has had little choice other than to be a borrower – and to be a borrower on an almost unprecedented scale.

A document published by the House of Commons library revealed that borrowing for 2020/21 was £167 billion higher than had been planned before the pandemic. Total spending to deal with coronavirus was put in the range of £310 billion to £410 billion.

That document, however, was optimistic about the cost of servicing the extra borrowing. Published in March 2022, it said: “The cost of borrowing is currently very low [but the public finances are] vulnerable to an increase in these costs.”

This, of course, is exactly what has happened. The rising cost of energy and the global supply chain crisis has caused inflation on a scale not seen for years: in order to try to keep a lid on inflation, central banks have increased interest rates – which, in turn, have increased the cost of servicing the UK’s debt.

And there was more debt to come. Within days of becoming PM, Liz Truss had committed to borrowing ‘up to £150 billion’ in order to cap a typical household’s energy bill at £2,500 a year until 2024. “Extraordinary times call for extraordinary measures,” she said.

Meanwhile, the cost of servicing the equally extraordinary borrowing was rising. On September 22nd, the Bank of England raised interest rates by 0.5% to 2.25% and conceded that the ‘UK may already be in recession’.

Rising rates meant that the Government borrowed £11.8 billion in August, almost twice as much as the Treasury forecasters had expected, as high inflation pushed interest payments to an August record. The inflation rate for August – at 9.9% – was down very slightly on July’s 10.1%, but there are plenty of forecasters ready to suggest that it could go much higher next year. Despite the action on energy bills, UK consumer confidence slipped into negative territory for the first time since 2020.

The tax cuts – including the changes to stamp duty, cuts in income tax and the reversal of the rise in National Insurance – had been well trailed in advance. Supporters of the Chancellor were looking forward to the speech, while critics were already sharpening their knives, with the Institute for Fiscal Studies warning that “the tax cuts gamble will make [the UK’s] debt unsustainable”.

The speech

Opening remarks
Kwasi Kwarteng began by acknowledging that the cost of energy is the issue that is “worrying British people the most”, and described the recent support for households and businesses as “one of the most significant interventions the British state has ever made”.

However, he stressed that high energy costs are not the only challenge confronting the UK, as growth is “not as high as it should be”. Mr Kwarteng therefore pledged “a new approach for a new era”, with lower taxes at the heart of his strategy.

Personal taxation and allowances
What A cut in the basic rate of income tax, from 20% to 19%.
When April 2023.
Comment The planned reduction in the basic rate of income tax to 19p has been brought forward by one year. The Government says this means more than 31 million people will get £170 more per year on average, and works out to a tax cut of over £5 billion a year. Mr Kwarteng says this also makes the UK’s income tax system one of the most competitive in the world.

There will be a one-year transitional period for Relief at Source (RAS) pension schemes to allow people to continue to claim tax relief at 20%. That means that even though the income tax rate will be 19%, personal pension contributions will get 20% tax relief at source.

What Top rate of income tax scrapped and single higher rate to be introduced.
When April 2023.
Comment The highest rate of income tax currently stands at 45% and is paid by anyone who earns more than £150,000 a year. But from April 2023, a single higher rate of income tax of 40% will be introduced, a move that Mr Kwarteng believes will simplify the tax system, make Britain more competitive, reward work and incentivise growth.

What Increase in dividend tax rates to be reversed.
When April 2023.
Comment The 1.25% increase in dividend tax rates is to be reversed, which will benefit 2.6 million dividend taxpayers with average savings of £345 in 2023-24. Additional rate taxpayers will also benefit from the scrapping of the additional rate of dividend tax. The Government believes the move will support entrepreneurs and investors, which can in turn drive economic growth.

What Stamp duty cut.
When September 23rd 2022.
Comment The threshold at which Stamp Duty Land Tax (SDLT) must be paid in England and Northern Ireland has been doubled to £250,000 for all home purchases.

The threshold at which first-time buyers are liable to pay SDLT, meanwhile, has increased from £300,000 to £425,000, and the value of the property on which first-time buyers can claim relief goes up from £500,000 to £625,000.

Mr Kwarteng says the measures take 200,000 people “out of paying stamp duty altogether” and will be a permanent change to the SDLT system.

Business investment and taxation
What Corporation tax increase to be cancelled.
When Immediately.
Comment The Government had planned to increase corporation tax from 19% to 25% in April 2023, but this will no longer go ahead.

Mr Kwarteng says this will give the UK the lowest rate of corporation tax in the G20 and plough almost £19 billion a year back into the economy. This, he maintains, gives businesses more money to “reinvest, create jobs, increase wages or pay the dividends that support our pensions”.

What Removing caps on bankers’ bonuses.
When Immediately.
Comment The cap on bonuses bankers are allowed to receive on top of their salaries, which was introduced by the European Union in 2014 after the global financial crisis, has been scrapped.

Under the previous system, bankers’ bonuses could not be higher than twice their annual salary without the agreement of shareholders. However, the Government believes that payment in bonuses “aligns the incentives of individuals with those of the bank”, which can in turn support economic growth.

Although the move is likely to prove controversial, Mr Kwarteng has insisted that the bonus cap “never capped total remuneration”, and instead pushed up the basic salaries of bankers or drove activity outside Europe.

In his statement, he argued that a strong UK economy depends on a strong financial services sector, with global banks creating jobs, paying taxes and investing “here in London, not Paris, not Frankfurt, not New York”.

What New investment zones.
When No dates confirmed.
Comment The Government will liberalise planning rules in designated sites, releasing land and accelerating development. This will be accompanied by tax cuts, with enhanced tax relief for structures and buildings, 100% first year allowance on qualifying investments in plant and machinery, and no stamp duty payments on purchases of land and buildings for commercial or new residential development.

Newly occupied business premises will be exempt from business rates, and if a company residing in the designated site hires a new employee to work in the tax site for at least 60% of the time, they will pay no National Insurance on the first £50,270 that they earn.

What Simplifying IR35 rules.
When April 2023.
Comment Workers who provide services via an intermediary will be responsible for determining their employment status and paying the appropriate amount of National Insurance and tax.

The Government believes reforms to off-payroll working introduced in 2017 and 2021 have added “unnecessary complexity and cost for many businesses”. As a result, it hopes this latest change will “free up time and money for businesses that engage contractors that could be put towards other priorities.”

What Energy Bill Relief Scheme.
When Immediately (announced earlier this month).
Comment The Government will provide businesses and non-domestic energy users, including schools, hospitals and charities, with a discount on energy prices for six months.

National insurance
What 1.25% rise in National Insurance to be reversed.
When November 6th 2022.
Comment The Government is reducing Class 1 and Class 4 National Insurance contributions (NICs) by 1.25 percentage points from November and cancelling the introduction of the Health and Social Care Levy. This was set to be introduced in April 2023, and proved to be one of the most controversial policy announcements of Boris Johnson’s premiership, as the Government had pledged not to increase NI in its election manifesto.

However, Liz Truss spent much of the recent leadership contest pledging to reverse this policy. The Government says the move enables almost 28 million people to keep an extra £330, on average, of their money next year.

The cost of living crisis

What Energy Price Guarantee (EPG).
When Immediately (announced earlier this month).
Comment The Government has pledged to limit the unit price that consumers pay for gas and electricity, which means typical annual household bills will be £2,500 for the next two years. This is on top of the previously announced plan to give all households £400 towards their bills this winter.

As part of the Energy Price Guarantee, the Government will also cover environmental and social costs, as well as green levies, currently included in domestic energy bills, for two years.

Other measures

Alcohol duty
What Planned duty increase for beer, cider, wine and spirits scrapped.
When February 1st 2023.
Comment Duty rates for beer, cider, wine and spirits will be frozen, which the Government believes will support businesses and help consumers with the cost of living.

An 18-month transitional measure for wine duty has also been announced, while draught relief will be extended to cover smaller kegs of 20 litres and above, which the Government says will help smaller breweries.

VAT-free Shopping
What VAT-free shopping for overseas visitors.
When No date confirmed.
Comment A digital VAT-free shopping scheme, designed to boost the high street and create jobs in retail and tourism, will be introduced. Under the scheme, overseas visitors to the UK will be able to purchase items VAT-free. Although no date has yet been confirmed, Mr Kwarteng said he wants to see this put in place as soon as possible.

Universal Credit
What Tighter rules on Universal Credit.
When January 2023.
Comment Universal Credit claimants who earn less than the equivalent of 15 hours a week at the National Living Wage will have to regularly meet with their work coach and actively take steps to increase their earnings, or risk having their benefits cut. The Government believes this will bring a further 120,000 people into the more intensive work search regime.

Industrial Action
What Trade unions will have to put pay offers to members.
When No date confirmed.
Comment The Government will legislate to require trade unions to put pay offers to a member vote, so that strikes can only be called once negotiations have genuinely broken down. Legislation to ensure Minimum Service Levels can be put in place for transport services, so that strike action does not prevent people getting to and from work, will also be introduced.

Infrastructure planning legislation
What New laws to simplify infrastructure planning rules.
When No date confirmed.
Comment Legislation to simplify the planning system for major infrastructure projects is to be put forward, as the Government believes the existing process is “too slow and fragmented”.

Mr Kwarteng said the time it takes to get consent for “nationally significant projects is getting slower, not quicker, while our international competitors forge ahead”.

He therefore wants to streamline assessments, appraisals, consultations and regulations, and review the Government’s business case process to speed up decision-making.

A list of infrastructure projects to be prioritised for acceleration has been published, covering sectors such as telecoms, energy and transport.

Reforms to the pension charge cap
What Pension Charge Cap no longer to apply to well-designed performance fees.
When No date confirmed.
Comment Draft regulations to remove well-designed performance fees from the occupational defined contribution pension charge cap will be brought forward.

The Government believes this will unlock pension fund investment into UK assets and innovative, high growth businesses, and ensure savers benefit from higher potential investment returns.

Reaction to the speech

Reaction to the Chancellor’s speech was – as we have already seen – sharply divided. Many right-wing commentators could not contain their excitement, while those on the left derided it as a ‘Budget without numbers’ and one that would benefit ‘only the rich’.

Writing in the Telegraph, Allister Heath described Kwarteng’s statement as “the best Budget I have ever heard a Chancellor deliver, by a massive margin”. He added that “hardcore, unapologetic liberal Toryism is back”, before praising the Chancellor for his commitment to “a flatter and simpler tax system”.

Across the political divide, the Resolution Foundation accused Kwarteng of ‘blowing the Budget’ with half of his planned tax cuts going to ‘the richest 5%’. The £45 billion package, the Foundation said, would ‘raise interest rates and see an additional £411 billion of borrowing over five years’.

There was plenty of reaction from other think tanks and lobbying groups too. Unsurprisingly, the Taxpayers’ Alliance called the speech ‘the most tax-friendly Budget in recent memory’. Adding a cautionary note on excessive spending, Chief Executive John O’Connell wrote: “Taxpayers will be delighted with a Budget that eases the burden on their bottom lines and promises a growth game changer.”

The Adam Smith Institute was similarly enthusiastic, saying that the Mini Budget was ‘the first step to getting the British economy back on track’. Head of Research Daniel Pryor said: “The planned increase in Corporation Tax would have hammered business, choked off investment and reduced workers’ wages. It’s also encouraging to see the Chancellor understands the importance of capital allowances.”

Meanwhile, Director of the Institute for Economic Affairs Mark Littlewood commented: “This isn’t a trickle-down Budget, it’s a boost-up Budget. It’s refreshing to hear a Chancellor talk passionately about the importance of economic growth, rather than rattling off a string of state spending pledges.”

Not everyone, though, was reaching for the champagne. The Resolution Foundation added the note that growth in the short term ‘is in Putin’s hands rather than ours’.

Director of the Institute for Fiscal Studies Paul Johnson welcomed the cuts to stamp duty, but drew worrying parallels with Anthony Barber’s 1972 ‘dash for growth’ Budget, which ‘ended in disaster’ and was now ‘acknowledged as the worst of modern times’.

The left-wing Momentum organisation’s take on the announcements was even simpler, and used just six words: “The Tories have declared class war.”

What about the markets? There are, of course, many other factors acting on the FTSE-100 index of leading shares and the pound, but the pound went into free fall after the Chancellor’s statement, and by the following Monday morning, it had fallen to a record low against the dollar.

Conclusions

Kwasi Kwarteng didn’t waste time in his first major speech as Chancellor. He spoke for just 25 minutes, starting by dealing with the cost of energy and then proceeded to rattle off a string of tax cuts.

“We won’t apologise,” he said in conclusion, as he dismissed the ‘tax and spend’ approach of previous governments, both Conservative and Labour. “Our entire focus is on making the UK more competitive in a fiercely competitive global economy.”

Depending on your political standpoint, you may regard the statement as “the best Conservative Budget since 1986”, as Nigel Farage described it, or perhaps you feel nervous about the Chancellor’s decision to ‘gamble on the biggest tax cuts in half a century’.

What is certain is that the new PM and her Chancellor will not be changing course. As Mr Kwarteng sat down, your immediate reaction might have been to wonder what further tax cuts he would introduce in his March Budget. According to the Sunday papers, we may not have to wait even that long. ‘Truss plans to cut taxes again in the New Year’ was the Sunday Telegraph headline, and the Express was rather more forthright with ‘Chancellor: You ain’t seen nothing yet’.

Former Chancellor George Osborne always made the same point in his Budget speeches: whatever measures he took, the UK could easily be blown off course by factors beyond his control. Right now, that “fiercely competitive global economy” includes the conflict in Ukraine, increasing tensions between the US and China, energy prices that are far higher than they were a year ago, increasing base rates to counter inflation and seemingly endless supply chain problems.

So the world – and the global economy – may look very different by the time Kwasi Kwarteng rises to present his March Budget. Rest assured though, that whatever happens in the next six months, we will – as always – keep you fully up to date with all the news, and how it impacts your savings, investments and long-term financial planning.

You’ve worked hard to be able to afford to send your child to university, and now the time has come for them to fly the nest and strike out on their own.

So naturally, you’ll want them to start their adult life with good financial habits. Here are a few bits of wisdom you could share with your son or daughter before they head off to uni, so they can truly fulfil their potential and make the most of their university experience.

Stay on top of what’s coming in and out
It’s really important that students keep a close eye on how much money is going into their account, such as student loans and any parental support that you might be providing. At the same time, they need to closely monitor what’s going out, such as council tax payments, utility bills, rent, food and mobile phone bills.

Once your son or daughter knows how much is going in and out of their bank account, they need to know how to budget, so they don’t get through their money too quickly, turn to credit cards and slip into debt, or – heaven forbid – get in touch with you asking for more funds to tide them over.

If your child gets into the habit of keeping track of their income and outgoings, they’ll have a clear idea of what’s left to spend on other things that enhance the university experience, such as going out with friends, buying new gadgets and enjoying trips and holidays.

There are plenty of apps to help them with budgeting, such as HyperJar Kids, Rooster Money, GoHenry and Gimi, so that’s a good place to start, along with simply writing all their spending down on paper.

Budgeting is vital at the best of times, but as the cost of living crisis bites, it’s more important than ever that your child knows how much money they’ve got and where it’s going.

According to a recent study by The Student Room, half of young people starting university in September are worried about affording things, while just 15 per cent don’t believe they’re at all affected by the rising cost of living.

Significantly, half of those polled said they felt financial skills, such as budgeting, were the most important thing missing from the school curriculum. That certainly suggests young people want some guidance and tips on how to manage their money, so they might be particularly receptive to any help you can provide as they prepare to live independently for the first time.

Teach them to become savvy shoppers
As your son or daughter prepares to get used to managing on a limited budget, it would be well worth teaching them a few tips to save pounds and pennies where they can. For example, do they know where to find discount coupons or that it’s cheaper to buy own-brand products in supermarkets rather than expensive branded goods?

At the same time, it would be well worth making sure they’re aware of how the cost of just a few small purchases can quickly add up. For instance, if they spend £4 on a coffee every weekday morning, that adds up to £20 a week, or £80 a month. Encouraging them to look at their finances in this way could help them to look again at their spending habits and make changes, which would then free up cash that could be much better used or even put into savings.

Work pays
Many students get part-time work to help them make ends meet during term time, which helps them afford the lifestyle they want to enjoy at university, as well as gain new, transferable skills that can bolster their CVs.

By encouraging your son or daughter to do the same, you could help them have a much more fulfilling university experience, and at the same, they’d gain invaluable skills that would set them up well for their future career.

Encourage them to speak about money
Money can be something of a taboo subject, but this unwillingness to talk about an issue we all have to deal with helps no-one. After all, your son or daughter might find themselves in a flat or house share with other students, and they need to feel confident raising financial issues if and when it becomes necessary.

At the same time, they should feel it’s okay to ask for help if they find themselves in serious difficulties, without any sense of shame or embarrassment. Again, this could make a big difference later on, as taking away the taboo around money will encourage young people to seek out the help and advice they may need in the future, perhaps from a friend, relative or a professional financial adviser.

You want your son or daughter to flourish as they begin their adult lives in earnest by living away from home for the first time, and we understand that. But good financial management is critical to making that happen, so they can make the most of these very special years and also understand the responsibilities that come with adult life.

A happy retirement doesn’t just happen by itself. You’ve got to make it happen, and that involves lots of careful planning and asking yourself what you really want from your post-working life.

The most obvious answer to that question is money, as we’ll all want financial security when we retire.

But that’s not all. We’ll want financial freedom too, so we can enjoy the life we want to live, and perhaps the one we’ve always dreamed of, without having to count the pennies.

That leads us nicely on to the other factors that contribute to a happy retirement.

For example, many will prioritise living in a desirable area, with house prices that they can afford, good amenities close by, such as shops and healthcare, low crime rates and plenty of green spaces locally.

Some, meanwhile, might also want to enjoy an active lifestyle, so they’d choose somewhere that offers opportunities to enjoy their chosen hobbies and pastimes, volunteer or build a social group with like-minded people.

If these things are of value to you, it’s really important that you consider them as you plan for retirement and make sure you’re saving or investing enough money. Otherwise, you may not be able to afford to live in an area that offers what you want.

Retirement should be a special time, when you can relax, indulge in leisure pursuits and enjoy precious family moments free of worry. But that’s less likely to happen if you haven’t taken the appropriate steps to maximise your income in later life, and worked out exactly how much you’re likely to need to do the things you want to do.

A financial planner can work with you to put together a bespoke retirement plan,, with your circumstances, needs, priorities and goals being considered every step of the way.

With the right advice and support, you’ll be in a much better position to set up your finances in a way that pays off for you in retirement.

Couples who live together but aren’t married sometimes refer to their boyfriend or girlfriend as their common law partner. But what does that actually mean in legal terms?

Well, to be blunt, not a lot, as you’re not related to your partner either by blood or by marriage. So if you die suddenly, they won’t automatically inherit your assets.

The only way to be sure that your partner will receive your wealth in the event of your death, without getting married, is to make sure you have a Will in place.

With a legally binding Will, you can lay out exactly how you want all your money, property, investments and other assets to be distributed after you die. That means you have the option of leaving some or all of your wealth to your partner, even if you’re not married.

But if you die without a Will, the Rules of Intestacy state that your inheritance must go to your closest living blood relatives.

That could conceivably mean that if you’ve been cohabiting with a partner for many years and have children together, the children would be first in line to receive your inheritance, and your partner wouldn’t have any right to inherit anything at all.

Naturally, that could be very distressing to your partner, at a time when they’d already be coping with a massive personal loss and possibly struggling financially without the income that you’d normally contribute to the household.

So if you’re not planning to get married, you should at the very least draw up a valid Will, to ensure your partner inherits whatever you want to leave to them.

It’s a simple way to guarantee that your partner is financially protected in the event of your death, and making certain that a distressing situation isn’t made significantly worse.

Common law marriage is a common myth
More and more couples are choosing to live together, purchase a property and have children without getting married.

In fact, it’s the fastest growing family type in England and Wales, with the number of couples cohabiting more than doubling to 3.6 million in the last quarter of a century. That means about one in five couples currently living together aren’t married.

But worryingly, many people don’t realise that cohabiting doesn’t bring any legal protection, such as an automatic claim to a partner’s estate if they die.

According to recent figures from the Women and Equalities Committee, 46 per cent of people in England and Wales mistakenly assume that cohabitants living together form a common law marriage, automatically gaining rights equal to a marriage or civil partnership.

As a result, it’s calling for changes in the law, such as providing cohabitants with the right to inherit under the rules of intestacy, and reviewing the Inheritance Tax scheme so that cohabiting partners are placed on an equal footing with married couples and civil partners.

The committee has also recommended the government “urgently” launch a public information campaign, as the prevalence of common law marriage can have “significant consequences, with many falsely believing they have legal protections which turn out to be non-existent”.

Caroline Nokes, chair of the Women and Equalities Committee, said: “The reality of modern relationships is that many of us choose – for a vast number of reasons – not to get married, even when in a committed, long-term relationship.

“It is completely unfair that these individuals have inferior protections to their married or civilly partnered peers. Deciding not to marry is a valid choice, and not one which should be penalised in law.”

Of course, there is no guarantee that the committee’s recommendations will be implemented by the government, and if it were the case, it could be many years away.

So for now, it’s really important that you make sure you know exactly what your rights are and take appropriate steps to make certain your wishes are fulfilled in the event of your death, such as writing a Will.

It could make a huge difference to you, your partner and your wider family, and give you a level of protection and certainty that can be invaluable.

If you have any questions about managing your wealth and how you can make sure your assets go to your chosen beneficiaries, please don’t hesitate to get in touch with us.

If you have assets such as land, property, cars, money and investments, you’ll want to be sure they go to your chosen beneficiaries in the future.

That way you can be sure that your loved ones have financial stability in the future and that you’ve left them a meaningful legacy.

But hang on, doesn’t that sound a bit like taking out a Will?

Well, yes, but there’s a key difference in that a Will only comes into effect after you pass away, whereas a Trust can be implemented from the moment it is set up. That can give you the confidence, certainty and peace of mind you want moving forwards, so you can be sure your family will be provided for further down the line.

At the same time, setting up a Trust can also have many tax benefits, and means your chosen beneficiaries won’t have to go through the Probate process following your death.

So it’s well worth exploring this option, seeking professional financial advice and seeing if this is the way forward for you.

What types of Trusts are there?
There are several different types of Trusts you can look at, depending on your specific wishes and circumstances:

Will Trust

This could be a good option if you’re married or in a civil partnership, as it makes sure your surviving partner can continue living in your property following your death. It can also ensure a share of the property can be included in your inheritance.

Discretionary Trust

This permits trustees to decide how to use the income from the trust and choose how much money beneficiaries will receive. That means it’s a good option for those who want maximum flexibility if their circumstances change.

Bare Trust

This provides or allows for the option of passing assets onto a young person when they reach the age of 18. That means the assets in the Trust will initially be held in the trustee’s name, rather than the beneficiary’s, and the trustee will be responsible for looking after them until the chosen beneficiary hits the age when they are able to access the trust themselves.

Trusts for Vulnerable Beneficiaries

This is a good option if you have a chosen beneficiary who lacks capacity to make decisions for themselves, and will therefore need financial support and help with managing their affairs. This could include a child, an under-18 who has lost a parent, or somebody with a disability.

If you have any questions on setting up a Trust to protect your assets for the future, get in touch and we’ll be happy to help. We have the knowledge and experience to advise you on the different options open to you and help you determine which ones best reflect your specific wishes and circumstances.

According to a recent report in City AM, there were 1.8m job vacancies advertised in the UK in the week to May 1st, up roughly 15% on the same period a month earlier.

The report stated that recruiters were ‘in overdrive’ as they struggled to fill the vacancies, with Neil Carberry, Chief Executive of the Recruitment and Employment Federation (REF) saying: “‘The data continues to show that employers across the UK are eager to hire new staff.”

Surely that has to be good news, on top of the near-30m that are already on UK payrolls.

There is a problem though. A few weeks after the initial report, the REF was back on the pages of City AM, stating that an ‘increasing skills shortage’ could hit companies’ growth. Neil Carberry said: “Labour supply is the big issue we have to solve.”

Recruitment companies were blaming a lack of candidates – specifically, a lack of suitably qualified candidates – for their inability to fill vacancies.

Let’s now leave the UK, and travel over to California, where companies are increasingly demanding that employees return to the office. Tesla boss Elon Musk was unequivocal, stating that everyone must do a minimum of 40 hours in the office every week. ‘If you don’t show up,’ he said, ‘We’ll assume you have resigned.’

Apple also issued the same edict – and immediately ran into trouble, with suggestions that half of all their staff may opt to leave rather than face a full-time return to the office.

Clearly people have got used to very different ways of working during the pandemic. For employers – and by extension for the economic recovery of the UK and world economy – these changes to ways of working, and what employees now want from a job, are going to cause problems.

Employees – especially Millennials and Generation Z which follows them – want very different things to their parents’ generation. They want to work for companies that share their values and don’t necessarily see salary as the key factor in a job. Reports that ‘millennials want nap time and pets at work’ may be slightly exaggerated, but there’s no doubt that having experienced working from home, a significant number have no wish to go back to commuting – as Apple are now finding out.

It means that employers, and the recruitment firms working on their behalf, will have to offer more flexible pay and benefits packages. They may well have to accept working from home for at least part of the week – and offer significant training to beat the skills shortages.

With the war in Ukraine, continuing supply chain problems and inflation hitting operating costs, finding the right staff is another big problem for employers to deal with. Hopefully they and the recruitment firms solve it, as the UK’s continuing economic recovery may well depend on it.

Andrew Bailey, the Governor of the Bank of England, made an apology last month. Not for inflation heading towards 10%, but for sounding ‘apocalyptic’ about the price of food.

The possibility of more increases in food prices was a ‘major worry’ for the UK economy, he said, as he warned of a ‘very big income shock’ and shortages of wheat and cooking oil.

Since he made that speech, the situation has, if anything, worsened, with reports of 25m metric tonnes of grain ‘trapped’ in Odessa – a figure which could, apparently, treble by the end of the summer as countries in Asia and Africa face food shortages.

It’s a simple law of economics that a reduction in supply and the same demand will send prices up. So how worried should we be? It’s a phrase beloved by the headline writers, but should we really worry about ‘heating or eating’?

Food prices will unquestionably continue to rise – and it is not just a problem for the UK. India has already halted wheat exports, saying that its ‘food security is at risk.’

The United Nations has warned of a global food crisis that ‘could last for years,’ with some poorer countries facing the possibility of long-term famines.

Last year, Ukraine produced 33m tonnes of wheat, of which it exported about 20m. As the world’s fifth largest exporter, that figure placed it behind France, Canada and the US with – inevitably – Russia at the top of the list. With sanctions having been imposed on the Russian economy, it is likely that Russia’s wheat may flow east to China – which recently suffered a poor harvest – rather than to the west.

Given all this, it is unsurprising that the price of Spring Wheat recently hit a 14-year high on US commodities markets, or that the president of large US food manufacturer recently joined Andrew Bailey in the ‘apocalyptic’ camp. Robert Unanue, President and CEO of Goya Foods said simply: “We are on the precipice of a food crisis.”

The problem, of course, is that food isn’t simply an ingredient like wheat. The price of aluminium for tinned goods is rising. Lesley O’Brien, director of Freight Link Europe, recently said that “pretty much everything you buy comes on the back of a truck”, and pointed out that the cost of running one lorry had risen by £20,000 compared to last year.

Should we be worried? It is difficult to avoid being worried. How worried you are will depend on your own financial circumstances – but if ever world events demonstrated the need for long term planning and saving for the proverbial ‘rainy day,’ it is surely those we are experiencing at the moment.

The buy-to-let market has made a strong bounceback from the pandemic, with demand for rental accommodation soaring in many parts of the country, in particular student hotspots such as Manchester.

But while investing in buy-to-let still offers attractive returns, landlords are still facing rising costs, especially when it comes to paying mortgages.

According to new figures from Property Master, monthly costs on a typical five-year fixed rate buy-to-let mortgage for £160,000 with a Loan to Value (LTV) of 60 per cent have increased from £346 to £359 since the start of 2022, or £13 a month.

Meanwhile, monthly costs on a typical two-year fixed rate mortgage for £160,000 with a Loan to Value (LTV) of 60 per cent have increased from £351 to £365, or £14 a month.

Angus Stewart, Chief Executive of Property Master, described the increase in the cost of buy-to-let mortgages as “relentless”, and warned the current “turbulence in the money markets” is making it harder for some lenders to raise the funds.

This, he said, means there is “a fear that as well as higher mortgage costs, landlords may also face reduced choice”.

“Whilst it is true that buy-to-let mortgage costs may look low from an historical point of view, the increases we are seeing now come at a very bad time,” Mr Stewart commented.

“Increased taxes and regulation have already chipped away in recent years on the returns landlords can hope to make.”

But while the prospect of higher mortgage repayments lies in store for rental landlords, it’s far from doom and gloom in the buy-to-let mortgage market.

Number of BTL mortgages being issued is rising
Despite increases in the cost of buy-to-let mortgages over the last few months, it’s clear that people investing in rental property continue to see the market as a strong investment option.

According to new data from Knight Frank, 275,600 buy-to-let mortgages were issued in the year to February 2022. This includes 159,100 remortgages and means the number now stands at a six-year high.

Figures also showed that the number of new mortgages taken out by buy-to-let landlords rose to 110,000 during this period, up from 75,8000 in the year to February 2020. These were taken out both by investors expanding their portfolio and those entering the buy-to-let market for the first time.

The attractiveness of the market to new and existing investors has been fuelled partly by increasing rental rents, which have outpaced house price increases in some parts of the country.

In fact, Knight Frank has estimated that rental values across the country could go up by more than 17 per cent over the next five years, and the rate of increase could be higher still in the main hotspots of activity.

Meanwhile, latest figures from Hamptons show that more than one in ten properties sold across Great Britain between January and March 2022 were purchased by buy-to-let investors.

Landlords bought 42,980 homes during the first quarter of the year, which equates to 13.9 per cent of properties purchased during this period.

Nevertheless, Hamptons pointed out that tax and regulatory changes have prompted more landlords to sell up in recent years, and that there are now around 300,000 fewer privately rented homes in Great Britain today than in 2017.

So while the picture in the buy-to-let market is clearly mixed, it’s apparent that savvy investors can still earn healthy returns on the right properties in the right areas, which could more than make up for rising mortgage costs.