The Budget Statement yesterday was overshadowed by an accidental leak by the Office for Budget Responsibility (‘OBR’) of its detailed response to the proposals an hour before the Chancellor of the Exchequer was due to announce her measures to the House of Commons.

Before calling Ms Reeves to the Dispatch Box, Deputy Speaker of the Commons, Nusrat Ghani MP, criticised the ‘unprecedented’ extensive media briefings of the last few weeks, before proceeding to condemn the OBR leak saying that such fell, “short of the standards that the House expects”. She further reminded the government, in her capacity as Chair of Ways and Means, that Budgetary announcements should be made to the Chamber before being released to the media.

There is precedent here, in November 1947 the then Chancellor, Hugh Dalton, made an off-hand remark to a journalist on his way into Parliament a mere 20 minutes before making his Budget announcement in the Commons:

“No more on tobacco; a penny on beer; something on dogs and [football] pools but not on horses; increase in purchase tax, but only on articles now taxable; profits tax doubled.” Dalton’s remarks were in the evening papers before he had finished his Budget speech.

The following day, Dalton apologised to the Commons for his ‘grave indiscretion’. The Prime Minister, Clement Atlee, accepted Dalton’s resignation that evening and appointed Sir Stafford Cripps in his place.

Some may lament the passing of such an honourable tradition, others may consider that Dalton’s resignation was somewhat of an overreaction. But there is a serious point here: briefings to media and consequent, often wild, speculation in some news outlets have become feverish in recent months. Indeed, some briefings have undoubtedly been ‘kite flying’ by politicians to test the reaction of their lobby group. Nusrat Ghani clearly had this second group in her sights.

“Whatever the source of speculation, the result is that, in the months leading up to Wednesday’s Budget, many have taken steps regarding their wealth that they would not otherwise have taken.”

Whatever the source of speculation, the result is that, in the months leading up to Wednesday’s Budget, many have taken steps regarding their wealth that they would not otherwise have taken. In some cases, these steps have been irrevocable. In many cases, the steps taken will have long-term effects.

So, what happened yesterday should serve as a cautionary tale.

Yes, there will be a surcharge on properties valued at more than £2m to be collected through Council Tax bills; however, such a tax on ‘unearned wealth’ has relatively recent precedent. After all, as former Chancellor, Labour’s Denis Healey introduced the investment income surcharge in 1974, a 15% levy that, when added to the top rate of income tax of 83%, resulted in an effective tax rate of 98% in some cases. By contrast, Reeves’s surcharge is not an ad valorem ‘wealth tax’, which many were certain would be imposed.

Some would argue that the surcharge represents a long overdue re-rating of more expensive properties, which were last valued for Council Tax purposes in 1991 (even Prime Minister Margaret Thatcher baulked at revaluing properties for rates in the mid-1980s hoping to simplify the system by introducing the so called ‘Poll Tax’, which did not go exactly as planned). Moreover, Reeves’s decision to defer the charge until April 2028 shows the magnitude of the practicalities involved in revaluing some 100,000 properties.

Of course, if there is a general election before 2028, the ‘mansion tax’ may not see the light of day; however, if it is introduced it could presage an entire re-rating exercise.

“…employees with sufficient income will still be able to sacrifice up to £60,000 per annum into their pension schemes for another four tax years (including the current one).”

Other measures, such as limiting the level of salary that can be sacrificed to a pension without attracting National Insurance contributions, will not come into force until April 2029. Putting it another way, employees with sufficient income will still be able to sacrifice up to £60,000 per annum into their pension schemes for another four tax years (including the current one).

This measure is not even proximate to the demise of the 25% tax free lump sum that has been flagged repeatedly as a certainty in some quarters since the current government came to power in July last year. Consequent to these rumours huge sums have been withdrawn from retirement vehicles. The irony is that these assets have now been brought into the personal tax net (in many cases) unnecessarily. What is more, if these sums are retained, they will now be subject to Inheritance Tax (‘IHT’) well over a year before IHT is imposed on ‘unused death benefits’ in April 2027.

Additionally, there was nothing substantive in the Budget on IHT. Again, speculation on limiting gifts by individuals to a lifetime limit of £1m has been rife for months as has been the possibility of extending the qualifying period for gifts to be free of IHT from seven to ten years. Consequently, significant sums have been passed on, often without thought for the consequences for family dynamics and the long-term protection of those assets. However, nothing whatsoever was said yesterday that even approached the speculation ahead of the Budget itself.

Even the limits on cash ISAs (from £20,000 to £12,000) will not be imposed until 2027 and only for those under 65. As the Chancellor noted in her speech, the returns from cash in ISAs has been negligible compared with the returns that could be achieved if those funds had been fully invested – an eminently sensible point.

Of course, extending the freeze on income tax bands to 2030/31 will continue the ‘fiscal drag’; however, the effect will be the same as adding to rates of income tax – a far more painful process. Furthermore, the thresholds freeze was first introduced by Reeves’s immediate predecessor, Jeremy Hunt, in 2021 under the last Conservative government.

“…the Chancellor’s fiscal ‘headroom’ will be £22bn, which is £12bn more than was estimated in March…”

Meanwhile, the Chancellor’s fiscal ‘headroom’ will be £22bn, which is £12bn more than was estimated in March – the (unfortunately porous) OBR have noted that the headroom is ‘small’ when set against the ‘array of complex tax changes’ announced yesterday. Indeed, we may see this headroom dissipate as the inexorable rise in the welfare bill continues to bite, for example the removal of the two-child benefit cap.

Of course, this Budget will bring taxes as a share of the economy to the highest level ever. And there are serious concerns about the direction of travel. However, this Budget was not the major assault on wealth that many were speculating that it would be – a reminder that the best advice is often to do nothing until the full facts are known or, at least prudently bring forward what was planned anyway.

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