A FEW COMMENTS ON BUDGET – ANNUITIES & GAMBLING

One thing is for sure if there is any unemployment in UK or Canadian paper forests, it will have been tidied up by tomorrow even though blogging and comment on line is now rampant! The teenage scribblers will have massed their troops with their respective erudite take on the Budget. I really bring nothing to the party apart from a few simple observations.

Firstly it was a budget of ‘nip & tuck’ with the borrowing requirement and the debt still far too high. The borrowing requirement will drop from £108 billion this year to a small surplus of £2 billion according to the OBR. Markets love the idea of prolonged austerity, with the prospect of blood running down Whitehall; so the Pound rallied to $1.6624. However, despite increased growth estimates for 2014 to 2.7% from 2.6% and next year to 2.3% from 2.1%, the FTSE 100 dropped a smidgen from being down 18 points to being down 34 points 6570.

There were a few little caveats that rocked a few sectors. Some of the proposed changes in the taxation of annuity thresholds saw some of the insurance companies take an absolute larruping of a slapping. This could turn into a financial free-for-all for the spend-thrift or less astute, apart from the fact the government is providing impartial advice to retirees to the tune of £20 million. Initially other financial brokers will be able to attract pension fund annuities with a view to funnelling them in to a potentially moderately risky environment, if the option of just withdrawing from the market is not exercised. Initially L&G lost 12%, Prudential -3% and Aviva 8%, Resolution -13%+ and wait for it Partnership down a massive 55%! One has to wonder whether the government actually knows the size of the can of worms it could be opening. Hard earned savings could potentially be dissipated very quickly by those who like to be ‘gungho, fixed bayonet and over the top! This initiative will reverberate around financial markets for some time to come.

On the plus side, many like me will greatly approve of the fact that the annual investment tax-allowance has been doubled to £500k from 2015. This is good for SMES and for new companies looking to take a quantum leap forward as is the change in the treatment of ISAS. Until now ISAS in cash had an annual amount of £7.5k and shares to the value of £11.500. As from 1st July the allowance will be £15k per person annually, split as the individual owner sees fit. Again this initiative is positive for business and investment.

Bookmakers did not fare well thanks to the penal tax levied on machines. After the news Ladbrokes fell by 12% and William Hill by 7.7%. Conversely Rank rallied by 4% thanks to bingo hall taxation being halved to 10%.

Finally many will be delighted that LIBOR fines will be used to alleviate hardship incurred by families from the emergency services.

I thought Ed Miliband’s response to the Budget was pitiful. He just vituperatively slagged the Tories off without ever talking about the content of the Budget – not very professional.

These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
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