Michael Moore’s Outlook on a milestone Budget
Some Budgets live long in the memory, others barely survive a week in the popular consciousness.
In the Coalition years the ‘Omnishambles Budget’ was a spectacular example of a fiscal statement in the first category, for all the wrong reasons (‘pasty tax’, anyone?). I still cringe at the memory.
But the Olympic standard ‘long-lasting for the wrong reasons’ event came a decade later, we all remember. The actual policy measures in Kwasi Kwarteng’s ‘mini Budget’ of September 2022 lasted barely a month, but the folk memory still lingers.
The first Budgets of a new Prime Minister’s term are usually milestone moments. That was certainly true of Mr Kwarteng, but also, more conventionally, for Geoffrey Howe in 1979 (going big on monetary policy), Gordon Brown in 1997 (surprising everyone by giving the Bank of England operational independence), and George Osborne in 2010 (creating the Office for Budget Responsibility).
Now in the autumn of 2024 we have another occasion to add to this list. Of course, before making any announcements, Rachel Reeves had already created an historic, defining moment as the first female Chancellor in the 800 year history of the office. But the scale of the speech she delivered did not disappoint either.
Assessing the impact of any ‘fiscal event’ in the first few days is, to use the technical term, a mug’s game. As a prospective political candidate in the mid 1990s I used to be that mug, offering up instant judgements on Ken Clarke’s Budgets in Radio Scotland studios, alongside John Swinney, now First Minister of Scotland, and others trying to make a political mark before the 1997 general election.
We rarely called it right, but we did learn the invaluable lesson that the Budget detail matters, and sometimes it can take a few days for all of it to sink in. If I remember little else of those Budgets (aside from Mr Clarke’s reputed fondness for whisky in the tumbler which sat on the Despatch Box), I did learn the art of the political caveat, which is not to be sniffed at.
And so you will now, rightly, anticipate that, writing this column a day after the new government’s first Budget, I am not daft enough to offer any speculation on its long-term economic or political impact. Other than to note that adopting the ‘invest, invest, invest’ mantra, and framing the speech around the theme of growth, was hugely significant, and really important for our industry. Having consistently positioned ourselves as ‘partners for growth’ over the past couple of years, this was welcome.
As was the outcome of the review of how the private capital industry will be taxed in the years ahead. First things first, we have long known the industry would be required to pay more tax under a Labour government. That was plain to see because the party had set out a set of policy priorities which would require extra funding, a position we have consistently respected.
But rather more obviously, we knew the industry would pay more tax because Labour had a manifesto pledge to end the ‘loophole’ the party saw in the treatment of carried interest. Ever since Rachel Reeves said that she would address the issue of ‘asset strippers with their Mayfair tax loophole’ in her first conference speech as Shadow Chancellor a few years ago, this much has been clear.
Since then we have been on a mission to set out the public value generated by private equity and venture capital. And to show that we can support the growth mission. The progress we had made on this became clear when the Chancellor said in her speech that the “industry provides a vital contribution to our economy” and official documents later spelt out “the importance of preserving the UK’s competitive position as a global asset management hub.”
Competitiveness. That is the key. The success of the industry in supporting over 2 million jobs in 12,000 businesses across the country, and the 140,000 jobs in the industry ecosystem itself, has been based on the UK’s international competitiveness at attracting global capital and global investment talent.
And the need to maintain that competitiveness has been central to our case to the government. In making the adjustments to the tax rate on carry set out for the next few years, we believe that principle has been recognised, no caveat required.
There is of course more detail to get through in the next phase of consultations into the new year. But assuming that can be worked through successfully, that will ensure the industry can indeed continue to ‘invest, invest, invest’.
Michael Moore
Chief Executive, BVCA
This article was originally published on 1 November 2024 on the Private Equity News website here.
