BlueBay AM: Commentary on today's UK autumn budget

BlueBay AM: Commentary on today's UK autumn budget

November 17, 2022

UK
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Neil Mehta, Portfolio Manager at BlueBay Asset Management, comments on today's UK autumn statement.

The autumn budget was about regaining fiscal credibility with one eye on the next election. UK chancellor, Hunt confirmed massive fiscal consolidation – attempting to undo the damage from the mini-budget – but with much of it kicked down the road till after the next election in 2024, when labour will likely be in power. Expected borrowing was also trimmed with a more targeted energy policy from March next year.

For now, the priority is the growth outlook, with increased spending in health, social care and schools paid through tax rises on high earners and employers. But as Hunt gives with one hand, he takes with the other, arguing inflation is more wicked than taxes, yet holding down tax thresholds which in itself is a massive inflation tax on the public.

The numbers from the OBRs analysis were staggering - real disposable incomes will fall 7% over next two years – the biggest fall on record, down to 2013 levels. The UKs prospects look challenging over the next 18 months and we expect the pound to reflect that.

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