- So the treasury here in the UK has warned
that UK taxes are going to rise to fill
in what's called a fiscal deficit of 50 billion pounds.
Well, I don't think that's any kind of surprise whatsoever
but what exactly does it mean?
What is a fiscal deficit?
Why is 50 billion quite a significant figure?
How does it translate to us individually?
And what are my top three predictions
in terms of which taxes are gonna rise?
Come November the 17th
in the autumn statement, stay with me.
And it's a very good article I found that was written
in the BBC in the first November.
Treasury wants tax rises to fill financial hole.
Everyone will have to pay more tax to
put the UK's public finances on a sustainable footing.
Well, there's no surprises.
Fiscal black hole, again reaffirmed
at around about 50 billion.
How much, how do we actually put that into perspective?
Bear with me.
I'm gonna explain that.
And there is going to be a autumn statement to be delivered
on the 17th in November, which will lay
out the potential tax rises or the tax rises.
They will come, that's for sure.
And also the cut in expenditure
and the daily paragraph has reported that Mr. Hunt
is planning to fill the budgetary shortfall
through a combination of 50%
of tax rises and 50% cuts to public spending.
But what of these tax rises that are likely to take place?
First and foremost, what exactly is a fiscal deficit
and why is 50 billion such a significant figure?
Well, allow me to explain.
If you run a household or a part of a household
for example, then you'll have income coming in
through your earnings, maybe employment
self-employment dividends, whatever it may be.
And then obviously outgoings, which is your expenditure.
Now let's say your income is 100
your expenditure is 98, then you'll have a surplus
of two every month or every year.
Let's make this on an annual basis.
Now let me flip the scales a little bit.
Let's say your expenditure is 200 and your income is 150.
Well, ultimately what will then happen, you'll
have a deficit every year or 50.
And the chances are the way you will make that up is
through borrowing.
And that's exactly what the government does.
Its fiscal deficit, if I was to put it into a formula
is simply total government expenditure.
Less any government receipts and receipts can be made up
through tax revenue and borrowing, but the fiscal deficit
is really expenditure minus tax receipts
excluding the borrowing part.
Well, quite simply, just like your personal household budget
it's really unsustainable.
Sooner or later, you are either gonna have to
cut your expenditure or you're gonna have to
raise your income and the government will have to
do the same.
Otherwise you're gonna keep borrowing to fill a gap
and that means more interest payments and more pressure
further down the line, you're just kicking the can
down the line and the markets eventually will react
adversely to that.
So the next question really is why is 50 billion
as a fiscal deficit so significant?
Well, here's a piece done by commonslibrary.parliament.uk
a bit of research
and it's saying in the 20 to 21 year, the
fiscal deficit was equivalent to 14.8% of GDP
which is a peacetime record.
And we know why that is because of the coronavirus pandemic.
So it's never been so high.
And how does that break down to us individually?
Well, an estimate would be
if we had to plug this 50 billion hole
for every tax paying individual employed individual
in the UK, plus the self-employed
it runs to an estimated 1,250 to 1500 pounds
per annum per individual.
That is how much extra tax we would have to pay annually
in order to plug this gap.
So one of the taxes that could potentially rise
in the autumn statement come November the 17th
remember the Chancellor Jeremy Hunt
and the Prime Minister are going for a 50/50 ratio here.
50% tax increases, 50% current spending.
So that means mathematically
if I do the arithmetic, it's 25 billion
which is the portion which will be addressed by tax rises.
And if you look on screen here
this is the public sector current receipts
of '21, '22, 916 billion pounds.
And this is actually published
by the commonslibrary.parliament.uk.
The link is up there.
You can go there and see this for yourself quite easily
and you will see the top three tax revenue receipts
of the government is income tax
national insurance contributions
and VAT, they collectively
I think make a roundabout 50% of the total receipts.
So onscreen is a really, really good graph.
I found a very good graph that got published
by the telegraph.co.uk
and it's titled where Hunt, Jeremy Hunt
that is the chancellor could increase taxes
come the Autumn statement on November the 17th.
Now it really does depend on what they're trying to achieve
and as we know, there's a 50 billion deficit of which
at least 50% is gonna be made up or plugged in by tax rises.
So it's a really good scale here you can see at the bottom
of billions of pound the source here Resolution foundation.
So attribution to them or credit to do you guys
this is not my work, this is theirs.
And it goes through some of the possible taxes
or the areas where taxes could rise and what
the actual revenue it could bring in.
And the first one is the health and social care levy.
Now, as you remember, as part of Rishi Sunak's budget
this was 1.25% that was gonna be levied, and I
think it was gonna be effective April, 2023.
And now that's kind of been reversed
by Jeremy Hunt's mini budget.
So that's not going ahead, but if it is
you can see the potential impact.
It could almost be crawling around about 15 billion back.
The one pence income tax rates rise.
Now I don't think that's gonna happen in the autumn
statement at all.
I don't think it's politically viable simply
because there's been a U-turn on the cut to 19 pence
from 20 pence in the pound and to the rate it to 21%.
Again, I just don't think it is actually palatable
at this stage.
And there's a host of other ideas here, which you can see
on screen, but I think one of the issues that Rishi Sunak
has is income tax and national insurance contributions.
As we saw in one
of the earlier graphs in this video, they're the
top two contributors to government tax revenue.
And I think by tinkering even more
with them could become a bit of a political issue
for him given there's a looming general election come
either next year or early part of 2024.
So what do I think is gonna happen?
Well, here's my take.
First thing is I think there'll be some sort
of VAT change.
Now, I'm not saying the headline rate of any way, shape
or form, but I think there'll be tinkering
around VAT value tax, which is an indirect tax.
And you can see here private school fees
VAT is one of the areas where VAT will be applied
to private school fees.
It isn't at the moment it's exempt, but they will apply VAT
and I think that will happen to other classes of income
or revenue or whatever suppliers should we
say is is the right word in that respect.
And I think there will be more on that to try
and sort of get some money back from VAT.
So that's my first take there.
The second attack I think is gonna be on capital gains tax
which is seen as a bit of a wealth tax.
And if we go back to these tax statistics
you can see here VAT'S number three
capital gains raises around about 41 billion.
So it's not the biggest.
So what the autumn statement is likely to have
is a combination of tax rises
in these other areas, capital taxes, VAT
fuel duty, council tax, whatever it may be, to try
and sort of bring in more tax revenue to fit
in that fiscal gap and capital taxes
is the next one, it could be either a freeze or reduction
in that personal allowance and a controversial one
but I'm gonna put it out there.
Maybe the 20% rate
of capital gains tax will increase to closer
to maybe the income tax rate
the high income tax rate of 40%, maybe not hitting 40%
but in that direction, if you catch my gist.
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