June was dominated by the run up to the Emergency Budget and its aftermath. Overall, this was well received despite hikes in tax on capital gains and VAT. The former will largely affect higher earners, whereas the latter will affect us all and is probably a regressive tax in that it hits the less well off progressively more than the wealthy. On the other hand, the increase is only 2.5%, so it should not have an inordinately large impact on spending overall. In fact, we may see a mini boom towards the end of this year as people try to get their discretionary spending in ahead of the increase. At least children’s clothes and food are not affected; they could so easily have lost their exempt status.
One positive result of the Budget was that the credit rating agencies appear to be satisfied that we are heading in the right direction, as they have left our AAA rating in place. Had they not done so, the cost of our massive national debt repayments could have sky-rocketed, making it far more difficult for us to dig our way out of the hole.
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