Bank of England and Budget Insights
Speakers: Paul Mount - Bank of England’s Deputy Agent for Yorkshire and the Humber
John Garbutt – Director- DCC Accountants
The President welcomed everyone to the meeting and noted that the number of animated conversations in the bar earlier suggests that it will be a good meeting.
The President Introduced Ian and his team from Roosters. Ian gave the safety notification, thanked everyone for attending, and welcomed them to Roosters.
Roosters have been on this site for six years, having moved from a site in Knaresborough in 2019, just prior to Covid hitting. We survived Covid and we are still here. We brew 2.2 million pints of beer here, this is distributed locally and nationally through chains, wholesalers and major supermarkets. At the end of the meeting, I will happily take questions and explain the process to those who are interested.
18 Months ago, we bought Daleside Brewery when the owners wanted to retire, and moved everything here successfully and kept all the staff. We brew for them but it’s an independent business. You are in the Sample Room, which his the Tap Room and public bar. It’s open six days/nights a week. This room is available for private hire for holiday nights, music nights, magic nights etc. Get in touch if you’d like to host anything here.
President thanked Ian for the use of the room and noted that the space is to be expanded in the coming weeks.
The President then introduced Time Together, the President’s charity, and handed over to Louise and Jo, noting that it was a real privilege to support such an organisation. Louise and Jo explained that Time Together is a local charity, which supports disabled people, autistic people and people with learning disabilities to live life well. They do that by providing one-to-one support for people but also run a multitude of clubs, activities, events, trips, and all sorts of opportunities. We do have a lot of fun and we're very privileged to be able to support them. Our one-to-one support is mainly on improving people's independence and well-being in their community. This year we opened an online charity shop that provides some income for our charity and also some volunteering opportunities for our clients. Jo gave details of some of the activities that take place, including:
A Pop Power Fitness class on a Tuesday between two and three. It's a free, inclusive class - anyone can come along and it's held at our offices in Crossley Avenue in Starbeck.
Community cuppa which is held on the last Tuesday of each month between 10 and 12. And this is open to anyone to come along and find out a little bit more about support that’s available.
Creative club on the last Tuesday each month 4-6 pm. We have an art exhibit of the work at Harrogate Library. That’s running until the end of December so please go along and have a look.
Community link meeting, which is held quarterly, on the first Thursday of each quarter. The next one is on the 4th of December. There's lots of different people come, Artisan, Dementia Forward, ourselves, the Hub at Starbeck, If anybody's interested in joining that, I can add you to the mailing list.
I'm organising an abseiling event for next year. If anybody would like to get involved with that, that would be fabulous. If you want to come along as a team building exercise or just to be part of the day, it would be a fantastic. I've put leaflets on all the chairs regarding out clothing donation stations. We’ve recently launched a campaign asking people to donate their unwanted clothes, good quality clothes, that you normally leave in wardrobe. Please have a clear out and let us know. I'm more than happy to come and collect. Or businesses, if they're happy to have a donation station where their staff could donate and we could gladly come and collect them there as well.
Movie nights. Anybody want to come along and join us for a movie evening? It'll be lots of fun. There'll be lots of popcorn and hot dogs and things like that, but we need to know the numbers.
We also have an allotment, which was a bit hard to get going, shall we say. But this year, it's been really, really good. And back in October, we held our first allotment feast, which we had Harrogate College involved. So we got the produce they’ve grown and the College designed the menu. It was really, really good. So we'll be hosting that again next year. If there are any keen gardeners who want to get in touch with us, that would be fabulous as well. But everything else is on our website, or on our social media. If you need to get in touch, please do.
The President noted that from a business point of view, there are things that businesses can do in addition to donating funds, such as team building via volunteering.
Bank of England Presentation – Paul Mount
The President introduced Paul Mount from the Bank of England. Many attendees will have heard Paul speak before, sharing important updates from the Bank. There would be an opportunity for Q&A after his presentation.
Paul began by noting that he lives in Sheffield, which has many breweries, but said that he thought this was “the coolest taproom ever.”
The Bank of England, Paul explained, is a government-owned organisation, accountable to the public via the Government, but operates independently. Its purpose is to set the conditions for households and businesses to thrive and prosper, and it undertakes a lot of work behind the scenes, including running the UK’s payment system.
Today’s presentation focused on monetary stability. Paul explained that low and stable inflation is the foundation of a strong economy. The Consumer Prices Index (CPI) is the national statistic that measures inflation based on a typical basket of goods and services, including everyday shopping items as well as larger purchases such as cars.
Paul showed a chart illustrating the change in price levels, explaining how inflation works. Inflation is the change in the general price level compared to a year earlier. He described the monetary transmission mechanism, noting that the Bank of England has one main lever – the interest rate. When the Bank changes this rate, other financial institutions follow suit, which affects loans, savings, and ultimately how much consumers can buy with their money. If you put interest rates up, you'd expect demand to come down because it's better to save, it's more expensive to borrow, and vice versa. So we're impacting demand, and that impacts on inflation. We're looking at managing demand in the economy, to try and bring it into balance with supply. If, broadly, demand and supply are more or less in balance, you'd expect to have a moderate state of inflation.
The Bank aims to balance supply and demand in the economy. In normal conditions, there would always be a small degree of inflation. However, changes to interest rates take time to affect demand and spending.
Paul described the process of setting the base rate. The Monetary Policy Committee (MPC) consists of nine independent members, each with one vote. The Committee meets eight times a year. Around 25 regional agents across the UK gather intelligence from businesses and feed that information into the MPC’s decision-making process.
At present, the CPI remains above target. Inflation has fallen, partly due to increases in interest rates. In September, inflation stood at 3.8%, with food price increases still a key driver, though lower than previously predicted. The Bank believes inflation peaked around September.
GDP growth remains subdued. It fluctuates, but is averaging around 0.2%, reflecting weak economic growth. Few businesses are experiencing strong consumer demand, so the economy is not particularly vibrant.
Employment growth is close to zero, and the Bank expects unemployment to rise slightly. The labour market is monitored closely as it can change rapidly.
The baseline forecast predicts GDP growth of around 1.4%, still below the Government’s desired 2–2.5% range. Inflation is expected to return to target by the end of 2026, settling at around 2.5%. The bank does a prediction of what they would call underlying GDP, which tries to take out some of the seasonal variations. And broadly, we're seeing GDP growth being pretty flat. It's about 0.1%, 0.2% per quarter. So an annual rate that at best is probably about 1%. And you'll know from reading the press that we want growth and they’d like to see 2% to 2.5% of the GDP. The growth of the economy is weak now, and that's really reflected very much in the conversations we have with businesses. There's very few businesses out there who say, yeah, we've got lots of demand. Life's easy, life's great. Most businesses, are finding demand is weak or flat so the economy is not particularly vibrant in terms of growth.
Unemployment growth is thought to have peaked and employment growth is close to zero. These are key indicators for us.
The base rate is currently 3.9%, and is expected to fall to around 3.5%. Interest rates are expected to remain at 3.5% by the end of the year.
However, Paul cautioned that such forecasts should be taken “with a pinch of salt”, as no one can predict future values precisely, though banks use these forecasts to guide their decisions.
Because inflation is still above target, interest rates are unlikely to fall yet.
The risk is that inflation could remain higher than desired, particularly if firms build higher prices and wages into future plans. The downside risk is that inflation could fall too quickly, potentially slowing the economy.
If inflationary pressures continue to ease, the Bank believes there is scope for another half per cent reduction, bringing the rate to 3.5%. However, there is still an element of inflation persistence, meaning it may take longer to come down and could require tighter monetary policy. Conversely, if demand weakens further, inflation may fall more quickly.
Paul then opened the floor to questions.
Q: Do you have any thoughts around what a good budget change would be?
There has been much discussion about potential reductions to benefits. There may be some changes affecting poorer families, but it is difficult to know at this stage.
Today there was talk about changes to child benefit, perhaps, so that would help lower income families. But overall my sense is that they're going to be taking money out of the economy to fund public services. There's been a lot of talk about that being done by income taxes. That might lead to improvement for conditions for some poorer families. My general sense is they're probably taking money away from consumers so you would end up with a low demand scenario if consumers are being taxed more and become more cautious about spending. It's more about longer-term things like productivity. The UK's got weak productivity. We need better productivity. That comes, for me, through structural things like better infrastructure, better training, and a better-trained and developed workforce. Those, to me, are the sort of factors that really matter for the long-term prosperity of the country.
Q: If the Bank of England forecast has it meeting its inflation target of 2% in two years time, isn't the interest rate still being kept at 3.5% or 3.6% or 1.5% above inflation? Is that not overly pessimistic and more like pushing that downside scenario?
Yeah, that's a good question. And it's a question that takes up a lot of time at the bank. So there's a concept in monetary economics around what's a neutral rate for interest. And they usually think about the real rate of interest. So if we had an interest rate of 3.5% nominal, 2% inflation, that's a 1.5% real interest rate. So people are getting 1.5% return on their money. We've had a period of very cheap money where interest rates, were cut to 0.1% after COVID, which was a significantly negative real rate. It doesn't seem sustainable to me in the long run.
I think in a normal economy, you'd have a positive real rate of interest. Where the balance lies between higher nominal interest rate helps savers cash in the bank but potentially hurts mortgage payers which is more disadvantageous. And that's the thing about monetary policy. It says nothing about income inequality or inequity in society. It's a very, very blunt tool. So it's not a tool that we can, in a sense use. That's got to be fiscal policy from governments giving incentives to save or helping people or helping families who are worse off or whatever it is and that's right because that's a judgment for politicians not the bank. Our one job is to try and keep inflation loans stable, keep the financial system stable. And that's the job we have. But we are cognizant that those changes we have put a lot of pressure on certain people in society.
Q: What do you feel will increase productivity?
Improving productivity requires better infrastructure and better training-these are the key long-term factors.
Q: Inflation vs interest rates?
The Bank’s inflation target is 2.5%, while the base rate is 3.5%. This means savers effectively earn a real return of around 1.5%. This scenario follows a long period of very cheap money. The balance between mortgage and loan costs and savings returns is complex. Interest rates alone cannot solve this – fiscal policy also plays a key role.
Q: What is the broader economic position?
Currently, the UK is in a low-growth economy with high public debt – a challenging position to be in. However, there is hope, particularly through AI and technological innovation, though there are concerns about how this might affect jobs. Paul noted that such transitions have happened before, for example, in the 1980s as we moved from a manufacturing to a service-based economy, and governments can mitigate impacts through the benefits system.
Q: What do you think about the impact of AI on jobs?
If we all just enjoyed lots of leisure time while AI did all the work – that’s too far in the future for me! Governments have a way of surprising us with what they do.
Q: Inflation and energy prices – how have the Bank allowed inflation to stay so high, despite rising energy costs?
Paul explained that the energy price surge was a huge shock to the economy. Raising interest rates sharply in response would have been damaging. Energy prices affect the broader economy through secondary effects, such as higher wage demands. The Bank uses interest rates to gradually ease these pressures.
If oil prices were to double tomorrow, the Bank might not immediately raise rates, depending on whether the rise was expected to be temporary. But if wage pressures increased alongside it, that could influence their response.
Q: Can you comment on the differences in International productivity across different countries? What are they doing that we aren’t doing?
Many developed countries are facing low productivity, though some in Eastern Europe are seeing improvements due to post-communist reforms, training, and technology investment. Productivity tends to be supported by education and infrastructure investment.
In the UK, technical and Level 3 education has been somewhat neglected, which may be a contributing factor.
Countries that invest in infrastructure also tend to be more productive. However, there are a lot of factors involved.
Q: What is the Relationship like between the Bank of England and Government? Is there a disconnect? Do you get consulted about planned changes to policy that have fiscal implications? How much do they listen? How do they try to impact your policy to achieve their own policies and how often do they do that?
There is regular communication. The Chancellor and Treasury officials meet with the Bank weekly, discussing upcoming policy announcements. The Bank provides feedback on how Government fiscal actions could affect interest rates.
The bank gets a heads up on the budget and will have discussions along the lines of “If you do that, this might happen”. So the Chancellor would always have the discussion about the impact on interest rates from any planned government actions. I understand that it’s a very proactive discussion.
Although the Bank is independent, there is an ongoing, productive dialogue between the Treasury and the Bank of England.
Q: I guess what we'd like to know is how proactive is that relationship? Because it seems to be very reaction-oriented.
It's very proactive. It's a working-level relationship. I don't know what you've read and in which media to suggest that it's all reactive. On the working level, it's proactive. We're independent. . There's a sort of wall between the two sides. But we are talking to one another over the wall. The Treasury and the Bank of England are having a dialogue, and regularly. As far as I understand it, it’s constructive dialogue.
Q: Business planning and economic outlook?
Many businesses are reporting late payments, there’s a lot of focus on collecting money and many businesses are being cautious about hiring and borrowing. There is significant uncertainty due to global political issues, and many consumer-facing businesses are holding back investment because of weaker consumer confidence. This is particularly the case with consumer-facing businesses who rely on consumer spending.
Q: President’s Question - The UK holds around a third of Europe’s debt. What would happen if everyone paid off their debts?
Paul explained that while households currently save around 12% of their income, if everyone focused on repaying debt, the economy would weaken. He noted that it’s important to borrow affordably and sustainably, rather than eliminating borrowing entirely.
Q: Is there now more cash sitting in business and household accounts.
Paul replied that businesses are indeed being cautious. Surveys suggest people are saving more due to a fear of future uncertainty or the need for emergency funds, reflecting the economic shocks of recent years.
The president thanked Paul for his very informative presentation and answers to the questions. He then introduced John Garbutt, Partner in DSC took us through a presentation about Pre-budget planning.
John Garbutt, DSC. Pre-Budget Planning
In advance of the budget, for the first time ever, I am going to ask if anyone has a heart condition that would be triggered by stress and anxiety. I have been told not to do this but I’m doing it anyway.
John disappeared momentarily behind a curtain and re-emerged dressed as the Grim Reaper for his presentation, noting that there are only two certainties in life, death and taxes.
To set the scene. It’s not party political at all as some areas I will mention may be the fault of the previous government who were equally inept.
I highly recommend investing in professional advice – if you have a good relationship with your accountant, IFA etc.rely on their help with your tax affairs.
Tax planning is a longer-term strategy for you, so if there is anything you can do before the budget that could help, and you were planning to do it anyway, it may be worth speaking to your advisor. This presentation is not advice. You should always consult your advisor before making any changes.
John then introduced the game Budget Bingo, noting that there were envelopes on the chairs,which people should not open quite yet. He then asked the audience which taxes they had heard rumours would be affected in the upcoming budget. These were listed as:
Income tax, VAT, EV Tax, Capital Gains, Business, Stamp Duty, IHT, Corporate, Alcohol duty, Betting levy, Council tax
The audience were then invited to open the envelope to play the game. He read out the taxes that could appear on the bingo card. These were:
Income tax, VAT, Electric Cars, CGT, Business Rates, Beer Duty, IHT, Betting tax, Council Tax
All these taxes are just a small part of the UK taxes, and they’ve all been subject to discussion recently; now, businesses are feeling unstable. We are looking for stability after the budget.
One option we do have is to do something before the budget. This is not advice.
Pensions
Whilst it's not technically too late to draw on your pension, I'm not sure that your pension advisor is going to appreciate any phone calls tomorrow saying "I'd like to get my hands on the tax-free cash, can we do this in the next 15 days?" But, what we do know is that there are allowances in place before the budget. So I think those allowances might change after the budget. We don't know, but if you were going to make a pension contribution before the end of March anyway, then you might want to make that contribution whilst they exist in allowances.
The timing of the budget is quite poor as we don’t know when the changes will come in. They could be immediate or in March. Use the time between now and April to review things.
If you haven’t spoken to your pension advisor recently, you should make yourself aware, with their help, of the changes that took place last year.
Everyone in this room is in some way selling their products and services. A lot of us will be financially articulate, but a pension advisor can give you advice.
Income Tax
I’m thinking that the manifesto promise will be broken and Income Tax will go up but I don’t know the timing of that. I hope it will be next year. If it’s from 1 December, all payroll teams will be tearing their hair out.
It’s my assumption that dividend tax will go up alongside the Income tax.
If you were planning to take a dividend before the end of March anyway, it may be judicious to declare a dividend now, before the budget. An Easy way to do this is to email your accountant and ask what would be the most suitable level of dividend to take. That way, it’s in writing to show you took advice.
Consider whether you want to look at pension or ISA contributions. It is worth consulting your advisor as to which option would be best in your circumstances.
And then with income tax, this is the same as I've seen just today, because of what was over the weekend about potential salary sacrifice limits. Why is that an income tax? That's because whether it's going to make sense of pension contributions or whether actually you might be better, not financial advice here, looking at ISA contributions. Both pensions and ISAs in which you can have CGT, free return, CGT and income. Just be aware if salary sacrifice comes in, then you do want. if you don't have an ISA thinking about using those in the future.
There is talk that NI might come down.
Capital Gains Tax
There were significant changes made last year. Do be aware this tax is not a protected one so it is open to be changed. It could go up and although there is a perception that this only impacts wealthy people, that is not the case. If you were going to do it anyway, there may be an argument to do it now. For example, a lot of individuals may have thought they don’t need to plan for this. If you were going to make use of your CGT allowance, your annual exemption of £3,000 before the end of April anyway, does it make sense to do that before the 26th of November just in case your CGT rates do go up from the budget date? It's one of those, if you were going to do it anyway, what's the harm in bringing it forward?
if you have a share portfolio on which there are gains, could you crystallise your rate now? If you've got losses, that's on some investments, that's quite an interesting position whether you should make use of those losses now or wait to see if CGT goes up. Again, if you learn to make use of your allowance anyway. The number of, whether I should say clients or comments that I'm aware of, in the past a lot of individuals might have said Well, the annual exemption for CGT is £12,000, that allowance came down to 6, it's now down to 3. If CGT rates go up as well, I would encourage you to consider use of an ISA, where you can put it in a wrap as protection against CGT in the future. The fact that your allowance is lower and the tax rates are now higher on capital gains encourages you to make use of the allowances that are available.
Inheritance tax.
There are rumours that the gifting of assets might be restricted. If you were intending to make a gift this year, you might want to do it while there is still an allowance.
There can be a misconception that if you gift out of income then you are not limited. There are occasions that is true but its not always the case. There is an IHT form that should be completed each time.
Estate planning is not something to do in the fortnight before the budget. Four months is sufficient time to plan and it’s good practice to know your position.
ACTIONS:
Do not do anything hasty.
Assess your position.
Conclude if any actions are appropriate. Are they urgent. It shouldn’t be knee-jerk reaction.
It’s highly unlikely that any tax exemptions are going to come down.
Questions:
There were no questions.
The President handed over to the Chief Executive who introduced new members.
Lily Bell introduced herself and her company Risewell. I started in the IFA World 10 years ago at a Small IFA Harrogate and then moved to London, trained in London, was employed for 10 years and started on my own business in January this year. I specialise in workplace pension schemes and SME company owner work. So my process is to go into medium to large companies and advise their staff on their company pension scheme. I'll do salary sacrifice, salary exchange to save the employees and the employer's tax and then in due course I will invest the money for the directors and the SLT people team as well. I'm totally independent so I'm not tied to any networks. I work for the client and the solutions that I represent and advise are best for my client and not affiliated or influenced by any other company. I am also linked into a corporate finance company and they will sell the business. So what I normally do is the workplace pension scheme, advise the directors of investments and as they scale and then approach exit, I will also help them sell the business. My partner will do the legals, financials and find the buyer, manage the whole process and I'll invest the proceeds as well. So it's a long game, a long relationship from the initial stage of business owner to scaling to exit. I've tried to harness the whole advisory process from start to finish.
Paul from Ake and Humprhis told the Chamber about the Christmas wine tasting and informed them that there are just eight tickets left for the lunchtime session. They are looking forward to the event. Some companies have been looking for Christmas gifts and Ake and Humphris are very happy to help with this. He noted that all he wants for Christmas is no increase in excise duty.
St Michaels Hospice introduced their new Calendar which is being sold in aide of St Michaels Hospice, Herriott Hospice and JustB. The artworks were created by children in the Thirsk area in the style of Lucy Pittaway and the calendar is £8.99 plus postage.
Mary introduced annual Burns Night event which she hosts personally, not to do with business. She is looking for donations for the raffle and to cover the costs. Sponsorship is always good too. I have a photographer, a bagpiper and a band, those are my biggest costs. If anyone wants to be a sponsor for any of those, and have their banners up at the event, please feel free to contact us at ??? Care Solutions.
Kate Rogata from Supporting Older People said she is looking for champions and has put a leaflet on the chairs. We support 300 older people in the Harrogate area, and if you choose to be a business champion, your business will be added to the website and the social media, and we can help by encouraging staff to volunteer. It’s coming up to Christmas, and we always do a campaign and give small gifts, and need volunteers for this as well as regular volunteer drivers, particularly for getting people to our tea and talk every month. We have 50 people to get to the Crown Hotel which is always challenging. We are also always on the lookout for new Trustees. We’ve definitely got a gap for someone with a legal background. If you are interested in any of the above please contact Kate.
Martin Mann noted that the Mentimeter link will be sent out tomorrow but the QR code is displayed on the screen if you prefer to use that. Please do complete the feedback form and tell us a bit more about how you enjoyed it
We have also been asked to host a post-budget breakfast on 28 November, so that Tom Gordon MP can hear feedback from businesses on the budget with a view to educating himself about what concerns businesses in the area and what he should talk about in Parliament. The Chamber will be contacting everyone here and will then open that out to all Chamber members. At this event there will also be a couple of questionnaires about North Yorkshire so you can give feedback to the County and Chief Executive.
Finally, next month’s meeting is 8 December, Cedar Court. The hotel are putting on Canapes to showcase their Christmas menu. This meeting will be the business safari. This is a challenge to organise, so if you cannot make it, please let us know the day before, because otherwise it makes the tables lopsided. This meeting will be focused on meeting with other members.
The President said that he got the best from these safaris when he went with the intention to learn more about the people he met rather than going with the intention of letting others know what he is doing.
The President thanked Ian Fozard for the venue and looking after us so well and thanked the members for attending, noting that we are here for you and when we go out to meet people, we do so to represent you. So it’s useful to find out what you think and how you feel key parties can better help you in your businesses and charities. I want to sit around the table with these people and tell them what members want to know.
The meeting was adjourned at 8 pm.
