UK Chancellor of the Exchequer, Rachel Reeves, delivered her second budget, and one of the most highly anticipated in years.
The UK bond market has been one of the main drivers of budget decisions, with headlines in recent days speculating that Reeves was doing everything in her power to keep it on side to keep the cost of borrowing down. One piece this week had the headline “Bond market power: Rachel Reeves is keen to keep the £2.7 trillion ‘beast’ onside", which showcased the tightrope Reeves was walking.
Reports in the press of Reeves’ yo-yo-ing about tax rises to aim for a fiscally sound budget have led to some concern in the market that today’s announcements would not focus enough on bread-and-butter issues.
Speaking last week, Grant Slade, UK economist at Morningstar, said, “It seems that the government’s fiscal consolidation efforts will be more backloaded, focusing on further freezes to income tax threshold indexation and a host of smaller tax measures. “Last week’s negative gilt reaction to the chancellor’s income tax U-turn is understandable, with prior indications of imminent income tax hikes having signalled a more aggressive, 'whatever it takes' approach to fiscal sustainability.”
With such loaded expectations – and little faith in delivery – let’s dive into what it contained.
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