HNW individuals to fall foul in the Budget
Hugh Wade-Jones is director of Enness Private Clients
Judging by some of the hysterical press reaction to George Osborne’s recent Budget, you could be forgiven for thinking that the Chancellor had stolen the food right out of pensioners’ mouths and presented it to the rich on a silver platter.
That is certainly the picture painted by some sections of the fourth estate and certainly what was insinuated by Ed Milliband’s challenge to David Cameron about whether he and his cohorts stood to benefit from the cut in the 50p tax rate. But while high earners may not have been hit quite as hard as expected in this year’s Budget, I don’t quite accept the argument that high net-worth individuals will be laughing all the way to the bank after Wednesday’s announcements.
I was extremely vocal in my opposition to the so-called “Mansion Tax” before the Budget and while it is to be introduced in the form of an increase in the Stamp Duty on purchase rather than as an annual tax, I still think it as an unnecessary levy that unfairly penalises the wealthy. It was actually quite ironic for Osborne to introduce it during what he described as an “aspirational” Budget. Clearly the government is all for people doing well, but not that well. It is also worth bearing in mind that such measures end up impacting a far wider demographic than those for whom they were originally intended. Granted, we are some way off average house prices being quoted in seven figures, but you can be sure that when such a time does come, the boundaries won’t be moved accordingly.
Another area that I was keen for the government not to become too pre-occupied with was its obsession with closing down stamp duty and other supposed tax loopholes. While Osborne did impose a £50,000 limit on tax reliefs, you only have to pore over some of what was being rumoured to realise that the government really doesn’t have a handle on the complexities and intricacies that such schemes involve. For all the plugging of certain gaps, you can be sure a leak will spring somewhere else before long.
My main motivation in all of this is not simply letting our richest citizens swell their coffers unchecked, but more being aware that continually going after our wealthiest individuals is not the correct way of getting our economy jump-started again. If we force our leading business brains and entrepreneurs out of the country, then the trickle-down they produce that benefits us all will also be on the next plane with them. In a way we are lucky that prime properties in the UK and London in particular remain in such high demand from foreign investors, because wealthy Brits themselves seem to be focusing their attentions elsewhere which would leave the high-end housing arena in a similarly stale state as the mainstream market. As it is, prime property is enjoying something of a purple patch, but we should be wary of too much outside intervention trying to artificially stimulate economic conditions.
High net-worth individuals were by no means the only demographic to fall foul of this year’s Budget, but the Chancellor would do well to pick his fights wisely. With the economy still on shaky ground due to eurozone uncertainty and the difficulties in cutting public spending, the last thing Osborne should be doing is provoking the very people likely to get things moving again.