Happy Halloween ... The Budget Cometh ...

“There is a budget coming in October and it will be painful” , Starmer warns in a Downing Street speech this week …

This could mean the Autumn budget could be not so much a Happy Halloween event, but more a Horror Halloween event. More Tricks than Treats in prospect from the new Chancellor of the Exchequer.

Rachel Reeves has already warned of difficult decisions and the need for tax rises in the October budget. The borrowing figures for July continued to be “above forecast” increasing the probability of tough decisions ahead.

Borrowing in the first four months of 2024-25 totalled £51.4 billion. This is just £0.5 billion below the same period last year and £4.7 billion above the monthly profile consistent with the latest OBR forecasts.

The OBR explains, the difference with the forecast profile in the July data, is driven by higher spending by government departments, as a result of strong growth in public sector pay. Receipts are broadly in line with profile in the year to date the OBR said.

It looks as if the OBR forecasts for the year of £80 billion will be exceeded significantly. The running rate (year on year basis) suggests borrowing this year will be around £120 billion. The consensus forecasts for borrowing PSNB basis this year is around £106.4 billion well ahead of the OBR outlook in March of £80 billion.

The Chancellor has strongly hinted there will be tax rises in the autumn budget as she promised to be "honest" about "difficult" decisions that lie ahead. The public had been "misled for too long" about the state of the country's finances.
    
"There will be more difficult decisions" around spending, welfare and tax, she added, when asked whether people should be prepared for taxes to be increased in the autumn.

Watch My Lips No Increase in Major Taxes …
During the election campaign, Ms Reeves promised not to increase major taxes on national insurance, income tax and VAT.
    
But there was speculation that Labour could target other taxes, including capital gains tax, inheritance tax and employers national insurance charges. No increase in the levels of income tax allowances would mean the “fiscal drag” bonus would continue. The Tory cut in National Insurance charges may be reviewed following the assessment by the Prime Minister ‘Things are worse than we ever imagined.

Speaking at a press conference shortly after announcing a series of spending cuts to make up part of a £22 billion funding shortfall, the Chancellor said …

"The truth is we did not know about the £22 billion black hole this year when we went to the polls on 4th July. There will be more difficult decisions around spending, around welfare and around tax at the budget and the spending review later this year.”

The chancellor announced a series of spending cuts, including cuts to the winter fuel allowance, which will now only go to those in receipt of pension credit. More cuts  are expected in the budget along with the tax rises.

More tricks, fewer treats in the Horror Halloween event. It’s going to be a cliff hanger … let’s hope it doesn’t damage the growth ambitions too much  moving forward.