The UK government says Britons will be given tax breaks to encourage investment in the London stock market as the Conservatives draw up a spring budget that will also cut employment tax for workers to boost election hopes. did.
Treasurer Jeremy Hunt told a packed House of Commons on Wednesday that a new UK personal savings account would allow an extra £5,000 to be invested tax-free in British shares. Under current rules, investors are allowed to deposit £20,000 a year into the account, which is exempt from capital gains tax.
The move is an attempt to revive the London stock market, which has been plagued by a lack of liquidity, low valuations and a dearth of IPOs. A recent report from Calastone found that UK investors are increasingly selling their UK holdings to buy US stocks, particularly tech stocks.
The FTSE 350 UK:NMX, Britain’s large- and mid-cap index, is down 2.9% over the past 12 months, while Wall Street’s S&P 500 SPX is up 27.9%.
As part of efforts to encourage more investment in the London stock market, Mr Hunt confirmed plans to introduce new requirements for pension funds to disclose their allocations to the UK, and set out how to stimulate domestic investment. With the funding, it said it would consider whether “further action” could be taken.
“We strongly welcome the Prime Minister’s announcement of the UK ISA,” said Charles Hall, head of research at investment bank Peel Hunt. “This is an important initiative that will boost savings, reverse outflows from UK equity funds and support investment in our country’s growing companies.”
Shares in ISA providers such as Hargreaves Lansdown
H.L.
and AJ Bell
AJB
Following the news, AJ Bell CEO Michael Somersgill downplayed how much of a boost Mr Hunt’s decision would have on the London Stock Exchange. They rose 2.2% and 2.7%, respectively.
Mr Somersgill said: “Increasing investment in British businesses is a laudable aim, but this haphazard and politically motivated decision will take us far short of achieving that aim.”
“50% of the money our clients currently invest through their Shares ISAs is invested in UK assets, so this new allowance will have no impact on our clients’ investment behavior,” he added. .
Still, the FTSE 250 index UK:MCX, made up of domestically focused mid-cap stocks, rose 1.4% in the UK on Wednesday afternoon.
The spring budget was drawn up ahead of the UK general election, which is expected to be held this year, with opinion polls predicting a landslide defeat for the incumbent Conservative Party. London-based research firm Capital Economics titled the occasion “Jeremy Hunt goes shopping for votes.”
There were also some crowd-pleasing fiscal adjustments. Most notable is the 2 percentage point cut in National Insurance tax, which the Financial Times calculates will increase the monthly take-home pay of someone earning £30,000 a year by £29.04 (equivalent to $36.95).
Mr Hunt also extended the freeze on alcohol duty until 2025, saying it was a move to support “great British pubs”.Shares in pub giant JD Wetherspoon
JDW
Up 2%, with smaller rival Marstons also
Mars
Added 1.9%.
Another popular measure is to help reduce driving costs, with Mr Hunt saying the 5p cut in fuel duty will remain in place and frozen for a further 12 months, meaning the average driver will pay £50 next year. He said it would save money.
On spending, Mr Hunt said the government would allocate an additional £6 billion ($7.6 billion) to the NHS, including reducing waiting times for appointments, which has been particularly painful for many Britons. It said it included £2.5bn for the project.
Mr Hunt said the government was in a position to support households with permanent tax cuts, given that inflation was slowing. “Tax cuts mean higher growth. And higher growth means more opportunity, more prosperity and more funding for valuable public services,” he said.
While the pound was little changed at around $1.2724 after the Budget was passed, government bond yields were much more volatile, falling 1.8 basis points to 4.088% in 10-year trading.
Concerns about additional gold supplies have been raised after Britain’s Debt Management Office said it aims to sell 265.3 billion pounds of government bonds in the 2024-25 financial year, more than analysts expected 258.4 billion pounds, Reuters reported. occured.
Hunt said the independent fiscal watchdog, the Office for Budget Responsibility, estimates that inflation is likely to return to the Bank of England’s 2% target within months, a move that is in line with the central bank’s own forecasts. He said it matched.
The OBR predicts economic growth will be 0.8% this year and 1.9% next year.