The UK government U-turn on providing winter fuel payments to pensioners is among the latest factors triggering concerns of possible higher taxes as the Spending Review nears full publication on Wednesday.
Per the Institute for Fiscal Studies (IFS) response to the U-turn, a return to full universality would cost £2bn, wheras introducing a new means testing system would undermine any hoped for savings (https://ifs.org.uk/articles/expanding-eligibility-winter-fuel-payment).
The commitment to higher defence spending was flagged through the Strategic Defence Review previously published, which pledged an uplift in spending. Much of this is intended to go to procurement programmes with long lead times. But those with insight into how spending in the military actually takes place have flagged up that the sums noted may still be too little, especially if NATO decides to move the goalposts towards more spending when it meets at a summit later in June (https://www.rusi.org/explore-our-research/publications/commentary/strategic-defence-review-and-challenge-turning-ambition-action)
In science and research, the government has signalled a pledge to spend, but there are mixed views on how successful this will be – particularly in the wake of NVIDIA’s pitch to boost investment in the country.
Susannah Streeter, Head of Money and Markets, Hargreaves Lansdown, said: “’With going for growth set to be central to the government’s Spending review, the Prime Minister is keen to build the UK’s reputation as a hub of AI activity. NVIDIA, is the super-star chip global giant with a $3.46trn valuation, so it’s pledge to invest in the UK will be seen as a coup for the government. CEO Jensen Huang’s view that the UK is enjoying a ‘goldilocks’ moment implying the environment is just right for investment, will be music to the ears of ministers.”
However, Darius McDermott, Managing Director at FundCalibre, noted: “It’s a telling contrast: the Prime Minister courts NVIDIA’s Jensen Huang just as another UK tech success story, Alphawave, is set to be acquired by an American buyer. This comes just days following Wise’s decision to shift its primary listing to New York last week, in another sign of UK public markets’ fragility.”
“Selling to larger US rivals has long been a common exit path for UK tech, but this need not be the status quo. If the government wants innovation to flourish at home, it must recognise the vital role a healthy public market ecosystem plays in retaining and scaling these businesses.
“Stripping away incentives for AIM risks permanently damaging one of the UK’s most effective growth engines of the market and economy – particularly when the revenue raised would be inconsequential.
“Our view is the government must prioritise policies that support domestic UK capital markets – not kill them. They are critical for a well-functioning economy and society. For too long, the government has neglected, overregulated and taxed them, driving liquidity and investment out of the UK.”
The Spending Review will be delivered by Chancellor Rachel Reeves at around 12.30 BST on Wednesday 11 June.
