I was hoping for a major financial and economic event this week to form the centrepiece of the column. Instead we will have to make do with the Budget.
My big hope ahead of the event was that Chancellor George Osborne would not do anything silly and I must do him credit and say he has at least achieved that aim. I just wish he didn’t look as if he was utterly bemused by it all.
He’s fine when delivering a pre-written speech that has no doubt been gone over time and time again. Luckily for him, the Budget has become less about the economy and more about election slogans, of which he had plenty, starting with the Budget being about ‘doers, makers and savers’.
Yet, increasingly, he sits there taking the punches from Opposition leader Ed Miliband looking as if he believes Miliband rather than himself. Contrast his demeanour with that of Prime Minister David Cameron sitting alongside.
There may be some benefit in having a Chancellor who has only a gentle grasp of economics. After all, Gordon Brown had a greater grasp than any Chancellor of the modern age and see where that got us. It is the fear that Ed Balls will be the same that is the most frightening aspect of a Labour Government.
Yet Osborne has so much going in his favour. The economy may be recovering despite him rather than because of him but who cares? Things are moving, admittedly slowly, in the right direction. Perhaps it is the slowly bit that baffles him. He may wonder, as many of us do, why the Budget deficit is coming down so painfully slowly.
He claims that the recovery is as forecast. That is on a par with claiming that the London Olympic Games came in under Budget. If you keep adjusting the estimate you get it right some day. The recovery is running about four years late, Mr Chancellor. But recovery it is, as employment figures this week demonstrated.
One other point Osborne made seemed curious. Osborne said past Chancellors were tempted to squander the gain but “I will not do that today.” Does that mean he will be similarly tempted next year just before the election? And succumb to temptation?
Breakeven in the Budget was originally supposed to come in the 2014-15 tax year. The latest forecast is for a modest £5 billion surplus in 2018-19. That will be welcome but hardly enough to finance a splurge even when it comes.
Nor does Osborne help himself by calling the new pound coin “a resilient pound for a more resilient economy”. The new coin looks like a threepenny bit, worth a post decimalisation one and a quarter pence, and is worth not much more than 3d did 60 years ago. It demonstrates the resilience of inflation.
OK, that’s enough carping. Overall the Budget does no harm, probably does a bit of good and benefits a lot of people by a small amount. Indeed, the theme of the Budget seems to be to dish out comparatively small amounts across a wide range of voters: bingo players, air travellers, beer and scotch drinkers, bomb victims and the air ambulance and lifeboat services to name but a few.
Manufacturers and exporters get some much needed extra help and there is a contribution towards infrastructure.
Once more we have talk of targeting tax dodgers. One hopes this adds up to rather more than previous initiatives.
The increase in the 20% tax threshold is sensible as it helps workers on low wages who might otherwise be better off on the dole. Raising the 40p threshold, at last, is fair and takes a bit of pressure off middle earners.
Less easy to understand is why those approaching pension age will be allowed greater access to their pension pots. I can see the argument that they should not be forced into poor value annuities but what is the point of building up a pension only to destroy it just when you are reaching the point at which you will need it?
The most important announcement from the point of view of investors came pretty near the end. The annual ISA allowance shoots up to £15,000, which is very good news indeed. It is sad that all of it can be held as cash, rather than just half, but one has to accept that most investors will chicken out and take the second class option of tying money up for a year or longer just to keep pace with inflation.
Those of us who sensibly invest in equities can now invest more tax free. Make sure you use your full entitlement next year and spread it out a bit, don’t wait until the last minute as the financial year runs out.
The reaction of the stock market looks unfavourable but is distorted by the sharp falls in share prices of annuity providers. Overall, there is no need to worry. Any fall in share prices remains a buying opportunity.
Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice.
