Burnham-Manchesterism

What we all crave is a clear sense of direction in taxation and economic policy, allowing long term plans to be made. This has been sadly lacking in recent times both under the current and previous governments. Some may argue “circumstances beyond our control” such as Covid, and the wars in Ukraine and the Middle East have made such clarity of direction hard, but that feels like a slight excuse to me.

History tells us this country thrives when there is strong economic growth generating and naturally increasing tax revenues that can be used to the country’s advantage. To a large degree, unless this need for growth is addressed you are left treading a tightrope between government borrowing and increased taxes – neither of which will fundamentally help the economy in the long term and when you have further restricted your wriggle room on taxation with manifesto promises, it makes things even harder!!

So, what do Mr Burnham’s history and recent announcements tell us about where we might be heading?

Manchester has grown its economy faster than the rest of the UK, and attracted a large amount of overseas investment, both positive signs, however you must note that it is a big jump to perform such things on a national rather than regional scale – still, we live in hope! And of course, if the economy did start to grow strongly many other issues the country faces would be easier to deal with.

He has not been in a position to make decisions about the major tax and spending policies at a national level. As an aside, it does seem odd being given such power without having demonstrable experience. In the corporate world there would be uproar in the event of a CEO being appointed without relevant experience, but hey ho.

There are consistent messages being sent out – a focus on the cost-of-living crisis, and improving public services, yet we have nothing to go on in terms of how this might be funded.

Given my initial comments, there are limited choices without breaking a major manifesto pledge. “Taxing the rich to help the poor” may be politically appealing, but I’m not convinced that raising capital gains, property and wealth taxes would make the measurable difference our economy needs.

He wants to devolve more power to other regions, and where such regions have had strong leadership such as himself or Andy Street, this could be broadly judged to be a success. But can we assume such great leaders be found in all parts of the country, and how does this fit with the need to control spending when control is being passed away?

All points lead to the need for some very bold decisions. Bin the manifesto promises? Raise the major taxes? Stimulate growth through reduced regulation and incentives to invest, I could go on. In the absence of such bold decisions, we will remain with what we have had for the last few years, of relatively “token” policies aimed at political popularity rather than a genuine attempt at change. If this ends up with more tax on the wealth (and job!) creators, a big opportunity will be lost.

We are to get a 10-year-plan, and the return of long term thinking in political decisions has to be welcomed, but I’m not sure how this runs up against a political system where he might face re-election in 3 years’ time.

So, in terms of financial planning there is an element of wait and see rather than act on speculation. However, that doesn’t mean defer making sound planning decisions, particularly when this involves the gifting or structuring of wealth for future generations. It would be hard to imagine the tax and legislation applicable to such decisions becoming more generous in the future.

And as we can broadly assume taxes are unlucky to fall any time soon, continue to take income, crystallise gains and generally not be afraid to pay a little tax as you go along – we should all pay some tax!

In a few months’ time, when we are all sat on the bus enjoying our cheap bus ride, and there is more clarity on where Burnham will lead us, we will be quick to act and advise our clients on the best course of action, and we will be watching carefully for any smoke signals in the interim!

I appreciate this article is a little bit political! But it’s driven from a desire to see the country prosper! Sometimes you need a leader that makes bold but unpopular decisions that set a new course to success, perhaps at the cost of their own long-term position in the role…

Colmore Partners is an Appointed Representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority, the registration number is 223112.

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The views and opinions expressed in this post are those of the author at the time of writing and do not necessarily reflect the views of Best Practice IFA Group Limited. They are not forecasts, guarantees, or a basis for financial decisions, and should not be relied upon as such.