CSA initial readout of the Chancellor’s Budget Statement

CSA Chief Executive Chris Leslie sets out his initial reaction to the Chancellor’s Budget

“In her first Budget as Labour Chancellor, Rachel Reeves sought to emphasise public sector investment, raising taxes by a significant £40billion (£5billion more than many commentators expected), with growth rates marginally downgraded by the Office for Budget Responsibility. The OBR also indicate that there may be inflationary and higher interest rate consequences from the Budget decisions. They also say that the size of the state is forecast to settle at 44% of GDP by 2030, almost 5% higher than before the pandemic, with Budget policy decisions increasing state spending by almost £70bn a year by then. 

While there are no direct policy changes referencing the collections and debt purchase sector, there are direct business impacts and also measures that will affect the affordability of debt repayment. For example, the OBR has downgraded its expectations of disposable household incomes principally because of the pass-through of higher employer NICS changes. 

Measures impacting business finance include:

• Employers National Insurance raised to 15% from April 2025 and reducing the threshold at which payments are triggered from £9k to £5k, raising a very significant £25billion pa by 2029 – with the IFS estimating that around three-quarters could be passed through to lower pay. Employer NICS is the big tax story out of this Budget.
• National living wage raised to £12.21 per hour and phasing out lower rates for younger adults.
• Capital Gains Tax increased basic rate from 10% to 18% and higher rate from 20% to 24% raising over £2bn in revenues
• The Energy Profits Levy increase could be passed on in higher energy costs to customers

Measures impacting public sector debt collection included:

• Counter-fraud teams at the DWP expanded and an additional 3000 anti-fraud staff to recover debt and error sums.
• Recruit 5000 additional HMRC debt compliance staff aiming to improve yields by over £2bn annually by 2029. 
• Increase the interest rate on unpaid tax debt by a further 1.5% from April. 
• Reducing share of benefits that can be deducted for repayment of benefit overpayments

The Government announced they will include financial services as one of their eight ‘growth-driving sectors’ in their Industrial Strategy.

There doesn’t appear to be reference to financial inclusion or any significant policy changes on consumer credit policy flowing from the Treasury’s announcements.

The Government will invest £12 million to acquire further credit reference agency data to enable HMRC to better target their debt collection activities.

The Chancellor will also shortly set out her vision for financial services sector in her Mansion House speech with new remit letters for the FCA to support growth.”