LONDON — The wait is finally over. After weeks of briefings, speculation, and U-turns, Chancellor Rachel Reeves has set out her final tax and spending plans for the year ahead. As expected, there is plenty for policy wonks to chew over. To make your lives easier, we’ve digested the headline budget announcements on energy, financial services, tech, and trade, and dug deep into the documents for things you might have missed.  ENERGY  The government really wants to bring down bills: Rachel Reeves promised it would be a cost-of-living budget, and surprised no one with a big pledge on families’ sky-high energy bills. She unveiled reforms which, the Treasury claims, will cut bills by £150 a year — by scrapping one green scheme currently paid for through bills (the Energy Company Obligation) and moving most of another into general taxation (the Renewables Obligation). The problem is, the changes will kick in next year at the same time bills are set to rise anyway. So will voters actually notice? The North Sea hasn’t escaped its taxes: Fossil fuel lobbyists were desperate to see a cut in the so-called Windfall Tax, which, oil and gas firms say, limits investment and jobs in the North Sea. But Rachel Reeves ultimately decided to keep the tax in place until 2030 (even if North Sea firms did get a sop through rules announced today, which will allow them to explore for new oil and gas in areas linked to existing, licensed sites.) Fossil fuel lobbyists, Offshore Energies UK, were very unimpressed. “The government was warned of the dangers of inaction. They must now own the consequences and reconsider,” it said. FINANCIAL SERVICES Pension tax changes won’t arrive for some time: The widely expected cut in tax breaks for pension salary sacrifice is set to go ahead, but it will be implemented far later than thought. The thresholds for exemption from national insurance taxes on salary sacrifice contributions will be lowered from £60,000 to £2,000 in April 2029, likely to improve forecasts for deficit cuts in the later years of the OBR’s forecasts. The OBR has a markets warning: The U.K.’s fiscal watchdog warned that the price-to-earnings ratio among U.S. equities is reminiscent of the dotcom bubble and post-pandemic rally in 2021, which were both followed by significant market crashes. The OBR estimated a global stock market collapse could cause a £121 billion hike in U.K. government debt by 2030 and slash U.K. growth by 0.6 percent in 2027-28. Even if the U.K. managed to stay isolated from the equity collapse, the OBR reckons the government would still incur £61 billion in Public Sector Net Financial Liabilities. Banks back British investments: British banks and investment houses have signed an agreement with the Treasury to create “invest in Britain” hubs to boost retail investment in U.K. stocks, a plan revealed by POLITICO last week. Reeves also finally tabled a cut to the tax-free cash ISA allowance: £12,000 from spring 2027 (the amount and timings also revealed by POLITICO last week), down from £20,000, with £8,000 slated for investments only. Over-65s will keep the full tax-free subscription amount. Also hidden in the documents was an upcoming consultation to replace the lifetime ISA with a “new, simpler ISA product to support first-time buyers to buy a home.” No bank tax: Banks managed to dodge a hike in their taxes this time, despite calls from the IPPR for a windfall-style tax that could have raised £8 billion. The suggestions (which also came from inside the Labour Party) were met with an intense lobbying effort from the banks, both publicly and privately. By the eve of the budget, City figures told POLITICO they were confident taxes wouldn’t be raised, citing the high rate of tax they already pay and Reeves’ commitment to pushing for growth through the financial services industry. TECH ‘Start, scale, stay’ is the new mantra:  Startup founders and investors were in panic mode ahead of the budget over rumored plans for an “exit tax” on wealthy individuals moving abroad, but instead were handed several wins on Wednesday, with Reeves saying her aim was to “make Britain the best place in the world to start up, to scale up and to stay.” She announced an increase in limits for the Enterprise Manage Scheme, which incentivizes granting employees share options, and an increase to Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) thresholds to facilitate investment in growing startups. A further call for evidence will also consider “how our tax system can better back entrepreneurs,” Reeves announced. The government will also consider banning non-compete clauses — another long-standing request from startups. Big Tech will still have to cough up: A long-standing commitment to review a Digital Services Tax on tech giants was quietly published alongside the budget, confirming it will remain in place despite pressure from the Trump administration. The government will ‘Buy British’ on AI: Most of the government’s AI announcements came ahead of the budget — including plans for two new “AI Growth Zones” in Wales, an expansion of publicly owned compute infrastructure — meaning the only new announcements on the day were a relatively minor “digital adoption package” and a commitment to overhaul procurement processes to benefit innovative tech firms. But the real point of interest on AI came in the OBR’s productivity forecasts, which said that despite the furor over AI, the technology’s impacts on productivity would be smaller than previous waves of technology, providing just a 0.2 percentage point boost by 2030. The government insists digital ID will ultimately lead to cost savings. | Andrea Domeniconi/Getty Images OBR delivers a blow to digital ID: The OBR threw up another curveball, estimating the cost of the government’s digital ID scheme at a whopping £1.8 billion over the next three years and calling out the government for making “no explicit provision” for the expense. The government insists digital ID will ultimately lead to cost savings — but “no specific savings have yet been identified,” the OBR added. TRADE  Shein and Temu face new fees: In a move targeted at online retailers like Shein and Temu, the government launched a consultation on scrapping the de minimis customs loophole, which exempts shipments worth less than £135 from import duties. These changes will take effect from March 2029 “at the latest,” according to a consultation document. Businesses are being consulted on how the tariff should be applied, what data to collect, whether to apply an additional administration fee, as well as potential changes to VAT collection. Reeves said the plans would “support a level-playing field in retail” by stopping online firms from “undercutting our High Street businesses.”  Northern Irish traders get extra support: Also confirmed in the budget is £16.6 million over three years to create a “one-stop shop” support service to help firms in Northern Ireland navigate post-Brexit trading rules. The government said the funding would “unlock opportunities” for trading across the U.K. internal market and encourage Northern Ireland to take advantage of access to EU markets.  There’s a big question mark over drug spending: Conspicuously absent was any mention of NHS drug spending, despite U.K. proposals to raise the cost-effectiveness threshold for new drugs by 25 percent as part of trade negotiations with the U.S., suggesting a deal has not yet been finalized. The lack of funding was noted as a potential risk to health spending in the Office for Budget Responsibility’s Economic and Fiscal Outlook, which was leaked ahead of the budget. 

LONDON — The U.K. government is going all-out to get Brits putting their money in stocks and shares. The timing could definitely be better. Lead policymakers and City of London analysts are increasingly warning of an artificial intelligence-fueled correction in equities just as the U.K.’s top finance minister prepares a major new policy to push Britain’s savers into the stock market. Chancellor Rachel Reeves has made upping retail participation in stocks and shares a high priority, launching a campaign earlier this year to unite financial firms in an advertising blitz extolling the benefits of investing. At next month’s budget, she’s expected to push changes to the tax system that would encourage investors to swap their steady, tax-free cash savings products for a stocks and shares ISA. With AI stocks soaring, it’s caused some raised eyebrows in the City. AI stocks in the U.S. account for roughly 44 percent of the S&P 500 market capitalization, and Nvidia just became the first company in history to become worth $5 trillion. The meteoric rise in has led some experts to warn there’s only one way out: The bubble will burst. “It would, unfortunately, be poetic timing if a major correction arrives just as the government is trying to get more people into investing,” said Chris Beauchamp, chief market analyst at IG. ATLANTIC INFLUENCE This week, City broker Panmure Liberum found that 38 percent of the U.S. stock market’s value is based in a “speculative component” that AI companies will continue to build out data centers and spend billions more on chips — by no means a sure bet. “While this capital spending could deliver substantial productivity gains that might eventually spread to the broader market, there is still no clear evidence that this is happening and is difficult to forecast the size of an eventual impact,” said Panmure analyst Susana Cruz in a research note. The “Magnificent Seven” group of tech giant composed around 20 percent of the S&P 500 at the end of 2022, but now make up more than a third of it, having tripled in size over just three years. The American index’s price-to-book ratio (meaning a company’s market cap compared to assets and liabilities) is at an all-time high, with 19 of the 20 valuation metrics tracked by Bank of America more expensive than the historical average. Despite the vast valuations, an infamous MIT study published earlier this year found that 95 percent of companies using generative AI were getting zero return. In early October, the Bank of England’s committee which monitors risks to financial stability warned of a “sudden correction” in markets, saying that “equity valuations appear stretched” as valuation metrics reached levels comparable to the peak of the dotcom bubble that unfolded in the early millennium, when the Nasdaq fell 77 percent from its peak, wiping trillions of the stock market. It took 15 years for the index to recover. The U.K. central bank’s warning came a month after global body, the Bank for International Settlements, issued a similar caution. Kristalina Georgieva, head of the International Monetary Fund, has also drawn comparisons with the dotcom bubble. Even Jamie Dimon, chief executive of U.S. banking giant JP Morgan, has said he’s seriously worried about a market correction. Over most periods investment beats cash, as long as individuals are willing to lock their money away for several years. Savers could have doubled their money over the last decade by putting their cash in the stock market rather than keeping it in a savings account, according to Schroders. Nvidia is up 13 percent this month alone — rather than an index fund which tracks hundreds of stocks, they stand to lose a lot of money if things go sour. | Jung Yeon-Je/Getty Images “No one can time the market, definitely not a bulky institution like the government,” Oliver Tipping, analyst at investment bank Peel Hunt, said. “Big picture, the government is right to try to stimulate more retail investment.” But if an individual decides to put their hard-earned savings into stocks they perceive as doing particularly well — Nvidia, for example, is up 13 percent this month alone — rather than an index fund which tracks hundreds of stocks, they stand to lose a lot of money if things go sour. “If you think about your average Joe, they’re not going to go into a safe index fund, they’ll put all of their money in Nvidia or Facebook and could get in at the wrong time,” one financial analyst, granted anonymity to speak freely, said.  Yet even an index fund, like a global equities tracker, is made up of close to 20 percent of the “Magnificent Seven” companies, due to the massive size of the American stock market compared to the rest of the world. While these funds have suffered significant drops in the past — U.S. President Donald Trump’s threat of tariffs in April caused a drop of 10 percent in a week — they have then recovered over a period of months or years. That’s good news for investors willing to wait for the market to correct any possible downturn — but if retail investors panic and withdraw their funds at the first sign of a loss, they could end up with less money than they put in, possibly wiping out emergency savings. “There is clearly a risk here that government is pushing people to invest when maybe they don’t have enough of a cash buffer in order to do that, that you’re going to be setting up problems for the long term, and it’ll be interesting to see who’s on the hook for paying that compensation,” said Debbie Enver, head of external affairs at the Building Societies Association. ONCE BITTEN, TWICE SHY City analysts also express concern that investors entering the stock market for the first time could be forever turned off from shifting their cash over to equities if an immediate correction is nigh. Only 8 percent of wealth held by U.K. adults is in stocks and funds, four times lower than in the U.S., according to data from asset manager Aberdeen. “There is no doubt that the government would find it much harder to drive retail investment in a period of financial turbulence,” added Chris Rudden, head of investment consultants at Moneyfarm. “Appetite to invest is linked to strong recent market performance. If there was to be a bubble that bursts in the coming few months, then it could make their job impossible.” IG’s Beauchamp argued that the government would need to pursue a broader education plan “to help people through the inevitable pullback” and prevent them from avoiding the stock market permanently. “How you do that without scaring people witless is a Herculean task,” he added. Laith Khalaf, head of investment analysis at AJ Bell, suggested investment platforms could encourage regular incremental savings in the stock market, known as dollar cost averaging, rather than throwing one lump sum in, which he said “mitigates the risk of a big market downdraft.” One solution that appears to be under consideration by Reeves as part of the autumn budget is to introduce a minimum U.K. stock shareholding in ISAs — which she could argue would protect British savers from a U.S. downturn and pump more money into local companies. This too is not without risk. The FTSE 100 derives nearly 30 percent of its revenue from the U.S., according to the London Stock Exchange, and U.K. markets are generally incredibly sensitive to macroeconomic shifts across the Atlantic. The FTSE 100 derives nearly 30 percent of its revenue from the U.S., according to the London Stock Exchange. | Jeff Moore/Getty Images Meanwhile, if an AI-induced stock bubble isn’t enough cause for concern, worries of trouble in the private credit sector exploded this month after the collapse of sub-prime auto lender Tricolor and car parts supplier First Brands left some U.S. banks with significant losses, causing a spillover onto public markets. BoE governor Bailey recently drew similarities between risks in the asset class and the 2008 global financial crisis, saying it was an “open question” if the event was “a canary in the coal mine” for a market meltdown. If one domino falls, they all could — and that would leave Britain’s chancellor in a real bind.

U.K. Chancellor Rachel Reeves’ bid to revive the London Stock Exchange via a mammoth advertising campaign could cost the City of London £120 million, according to confidential documents seen by POLITICO. Some smaller financial services companies are already pushing back at the price and considering pulling out of the Treasury-initiated plan to get British savers to put their cash savings into stocks and shares. According to confidential documents prepared by the Investment Association on the campaign’s funding structure and direction ahead of an initial meeting on Monday, marketing services agency WPP will propose three scenarios for the campaign which would cost between £15 million and £40 million per year. These costs include agency fees, production fees, including creating a “hero” film to promote savers owning a slice of British companies, social media content, the purchase of TV slots and digital ads. There are also variable costs such as the number of delivery channels used and how many “bursts” of advertisement activity the group decides to do throughout the year to make savers aware of the benefits of retail investing, the documents show.  These core campaign costs will be funded entirely by firms that are steering group members which will have to sign a three-year commitment, the IA wrote in the documents. The group — which is led by the IA and chaired by the CEO of Barclays Private Bank and Wealth Management, Sasha Wiggins — is made up of a mix of smaller and larger firms and banks, including NatWest, Barclays, HSBC, Lloyds Banking Group, AJ Bell, Hargreaves Lansdown, Vanguard, Robinhood UK, Schroders and the London Stock Exchange.  Two directors at smaller and medium-sized investment houses, granted anonymity to speak freely, voiced concerns about the “proportionality” of the costs, telling POLITICO they have yet to decide whether to take part as a result.  The IA, Treasury and WPP have been contacted for comment. Despite pushing for the campaign, the Treasury will not be involved in its funding. Reeves announced in July the “hearts and minds” campaign, inspired by the 1986 “Tell Sid” ad drive that was launched after the privatization of British Gas when Margaret Thatcher was prime minister. The plan was first reported by POLITICO. The Financial Conduct Authority and Money and Pensions Service will play an advisory role in the campaign, and the Treasury will play an observer role, with new City Minister Lucy Rigby invited to speak briefly at the group’s first meeting on Monday, according to the campaign documents.   U.K. Chancellor Rachel Reeves’ bid to revive the London Stock Exchange via a mammoth advertising campaign could cost the City of London £120 million. | Carl Court/Getty Images Reeves — battling uninspiring U.K. economic performance — told a City of London audience in July that “for too long, we have presented investment in too negative a light, quick to warn people of the risks, without giving proper weight to the benefits.” Her plan came as the LSE — once the pride of Britain’s powerhouse City of London financial district — continues to suffer from a decline in listings and low trading volumes in recent years, with high-profile companies instead choosing to float in the U.S. While cash-rich savers may be tempted by future advertisements and government figures, which have told consumers their money could earn £9,000 more in 20 years’ time based on a £2,000 investment in stocks and shares rather than cash, they may also be put off by recent warnings that the stock market appears to be in a bubble state. Analysts and economists warn in particular of stocks of companies in the technology and artificial intelligence sphere, with valuations that appear similar to the 2000 dotcom crash. SIZE-BASED FEES The IA is proposing two scenarios to charge firms based on size, with those with under 1,000 staff being asked to pay £250,000 or £500,000 as a first-year contribution, and firms with staff numbers above 10,000 either £1 million or £2 million.  Medium-sized firms with between 1,001 and 9,999 staff members could pay between £500,000 and £1 million. Firms are also being asked to stump up thousands to cover membership and legal costs.  However, the total costs may change depending on what firms agree to pay and what agency is chosen ahead of the multi-year campaign starting next April, with the IA cautioning in the documents that the “diversity of channels and the frequency of activities across these platforms will significantly influence the overall cost of the campaign.”  One senior executive, who is part of the 22-member steering group, said that the total figure is likely to be less than £40 million a year ahead of a final decision on the campaign costs and funding model on Monday. Although WPP is the only agency presenting on Monday, the group has opted for an open competitive pitch, POLITICO was told by an individual with knowledge of the process, so other agencies will present in the coming months unless WPP’s current pitch is approved by the steering group.  The group will meet no less than four times annually and will act as the principal decision-making body for the campaign, the documents show. Discussions will focus on “laying the groundwork for sustained behavioural change” and “normalise investing as a routine part of financial planning.”  “This is a long-term effort, spanning multiple years and relying on consistent messaging, trust-building, and engagement across various segments of the population,” the IA wrote.  “This campaign will not be a commercial initiative, it is intended as an educational campaign to improve awareness and encourage more people in the UK to invest.”

LONDON — U.K. Chancellor Rachel Reeves is considering launching a refreshed version of a Thatcher-era advertisement campaign to save the ailing London Stock Exchange. Multiple senior City figures told POLITICO they have been contacted by the London Stock Exchange Group — the company that runs the London stock market — to sign up for a “hearts and minds” campaign to convince the public to move their cash savings into British stocks and shares.  It comes as the stock exchange continues to struggle with an exodus of companies leaving for greener pastures in the U.S. due to depressed valuations and a lack of capital. According to the IG Group, 88 firms left the LSE last year compared to just 18 that joined. The chancellor had weighed up cutting the tax-free Cash ISA allowance to get more savers to invest, with the Treasury saying in the March spring statement it wants to “get the balance right between cash and equities to earn better returns for savers, [and] boost the culture of retail investment.” But Reeves has since backed down from that plan, according to reports.  The chancellor and the LSEG have been inspired by the 1986 “Tell Sid” campaign that was launched after the privatization of British Gas when Margaret Thatcher was prime minister, which helped boost the number of Brits that held shares from just five percent to 19 percent across the 80s and 90s. One director at a major investment platform said the idea had been “doing the run around for quite a while” and there was now a “certain amount of industry coordination that’s going on behind the scenes” to bring the idea to life. Like others quoted in this report, they were granted anonymity to speak candidly about the plans. ‘MULTI-YEAR CAMPAIGN’ The director said that the campaign could run around the end of the tax year next April, when most retail investors make decisions about where to allocate their savings, and it is likely to be about investing as a whole rather than urging savers to take a stake in one private company like the original campaign.  However, the timings of an announcement are unclear. Another policy director at a trading platform said they were contacted by an LSEG executive who told them it could be mentioned at Mansion House next week, but they admitted it was still “in the early stages” of planning.  “They’re [the LSEG] talking a multi-year always-on campaign and are trying to get brokers to sign up,” they said.   “There have been some general conversations, but there’s been no assignment of roles as yet,” said a separate director at a financial services trade body involved in the plan.  But in an interview with POLITICO last week, the City of London Corporation’s policy chair, Chris Hayward, said the LSEG is planning to run “a campaign on retail investment very, very shortly.” Some high-street banks have been calling for a retail investment advertisement blitz in recent months, and in May, the Building Societies Association urged the chancellor to replicate the 1960s New York Stock Exchange campaign.  When asked about the plan, an LSEG spokesperson declined to comment, noting remarks by its CEO last month that “now is the time to have a long-term public campaign that would demystify investing.” A Treasury spokesperson declined to comment. When Reeves does announce a campaign, it will fulfill a Labour pledge from its financial services manifesto that was published in the run-up to the election.  It would also be a copy and paste of a former government policy. In 2023, then-Chancellor Jeremy Hunt floated creating a new “Tell Sid” campaign centered around the sell-off of the government’s NatWest shares, but it was eventually scrapped.