15 Mar 2023

Hunt’s Balancing Act Budget

Today, Jeremy Hunt finally got to deliver a full budget. He made big plays on enterprise and labour force participation but faces accusations of playing a little loose with some of his announcements.

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From Carbon Capture to free childcare, Hunt banked plenty of political capital from announcements that won’t actually be paid for until after the next election. But a more favourable economic outlook has enabled him to deliver a far less austere programme than was expected just a matter of months ago and has potentially set him up for a pre-election giveaway at his next budget.

In our budget predictions note on Monday, MHP said that ‘there is a balance of ambition and risk to be struck’, this evening four MHP Group specialists offer their analysis on whether the Chancellor performed that balancing act successfully, and what his budget will mean for their sector.

Mario Creatura
Director, Public Affairs and former Conservative Party SpAd on the political impact of the budget for the Conservative Party.

Usually Government is a hive of activity. There’s always a strategy to announce, a policy to launch, a crisis to respond to. But at the tail-end of last year, Downing Street was unusually quiet. They chose, broadly, not to intervene, to publish, or to enact – at least not to the scale and volume we have been used to. They were, for all intents and purposes, in self-inflicted hibernation.

That was deliberate. The last few months of 2022 were a political write-off, everyone was desperate for a festive break, and nobody was prepared to have their minds changed about the parlous state of Government. So Prime Minister Sunak took his advisors to Chequers to plot and to plan for a relaunch in 2023.

We are now seeing very clearly seeing the intended fruits of that reset.

Early in the New Year Sunak set out his Five Promises, deliver on them and trust might begin to be restored in the Conservatives. Soon after, the Government wielded Section 35 to veto Nicola Sturgeon’s controversial Gender Recognition Act. Then came the surprisingly popular, ERG-quelling Windsor Framework. Days later, a diplomatic success with Macron to help tackle the small boats crisis followed swiftly with a China-facing multi-decade military partnership with Australia and the US.

These announcements have all be diligently planned by Ministers and Downing Street strategists, flexing their muscles after a bit of time to get their feet under the table.

With Amber De Botton and James Forsyth, formerly senior political journalists at ITV and The Spectator respectively, heading up No 10 communications and political strategy it’s no surprise that the government grid is being planned to within an inch of its life – and the ramp up to today’s Budget could not have been better for the Chancellor.

The General Election will be in 2024. That gives the Government a year to pull out of the polling nosedive that it currently finds itself in. To do that they needed big, retail policies that translate in easily shareable, pleasing front pages.

That’s exactly what Chancellor Hunt sought to deliver today with a massive investment and reform package on childcare, extending the Energy Price Guarantee at £2,500 for three months and freezing fuel duty for a thirteenth year, saving the average driver around £200 – and a £63 million fund to keep the nation’s swimming pools open.

The devil will as ever be in the detail, but you can bet the top story on tonight’s news bulletins won’t be the increase in Corporation Tax to 25 per cent: it’ll be childcare, fuel duty and the energy price guarantee.

There’s at most 18-months to a General Election – it’s clear from today’s Budget that Prime Minister is not going down without a fight. His retail policies, success at framing a narrative of competence and delivery, could yet seal an unprecedented 5th General Election win for the Conservatives.

For Rishi Sunak – the Great Reset has begun.

Yasmeen Sebbana
Account Director, Public Affairs and former Head of Office and Forward Planning to Sir Keir Starmer on Labour’s response to the budget.

This was Keir Starmer’s first response to a Jeremy Hunt Budget and the theme of his rebuttal was a critique of the Government’s approach to encouraging growth.

Starmer focussed on tying the current government to their record, building a narrative that the country’s economic troubles are not the result of global factors beyond our control but rather due to the chaos following Truss’ fiscal event and as a direct result of choices made by 13 years of consecutive conservative governments.

Starmer’s objective is to present his party as a safe pair of hands, capable of avoiding economic fumbles. However, he knows that while consistency may be enough for the Chancellor to avoid another scandal in this ship-steadying budget, Labour needs to go further in order to overturn the largest Conservative majority since 1987. Although current polling places Labour as being more trusted on the economy than the Conservatives, Starmer knows the polls will tighten between now and the next General Election and that shrewd management of the economy must be combined with strong ambition for the country.

This is where Labour’s own economic mission of securing the highest growth in the G7 allows them to accuse the government of lacking vision – by going beyond the government’s current plans for growth – and to present themselves as both competent and ambitious.

Starmer was also keen to show that the Labour Party didn’t need to wait until 2024 to start pushing policies to combat the cost of living crisis. He accused the government of copying Labour policy on the energy price guarantee, the windfall tax and extending the fuel duty cut. Labour are keen to emphasise these individual policy wins as they believe it presents them as a government-in-waiting and creates cover for criticism of lack of wider economic policy ahead of their manifesto being written.

Starmer’s repeated references to the government’s plans as ‘sticking plaster politics’ and Britain as the ‘sick man of Europe’ present the economy as an organism that needs long term preventative treatment to ensure it can grow healthily. Strategists around Starmer know that Labour is consistently more trusted than the Conservatives on the NHS and by linking the decline of the NHS under the Conservatives – through longer waiting lists and lack of medical school places – to the state of the economy, they believe they have found a way of increasing Labour’s credibility as stewards of the economy to the public.

Pete Lambie
Associate Director, Capital Markets on what the markets will make of today’s announcements.

Constrained by a tough fiscal backdrop and a vow to hold down spending to tame inflation, Hunt has worked to ameliorate the headline increase in corporation tax, with the c.£9bn Full Capital Expensing scheme likely to boost business investment in the short to medium term. Equally, the lifting of the lifetime pension allowance should provide additional flows into equity markets, while bolstering the wealth management sector.

Whisper it, but we might just have seen a normal Conservative Budget for the first time in three years. Against a backdrop of continued turmoil, with an accelerating market sell off out of the US and a weekend of fantasy banking M&A for the Chancellor, he seems to have successfully not poured fuel on the fire today. While last year’s mini-Budget was the equivalent of a fiscal suicide pill for his predecessor, Hunt’s four E’s are relatively easy pills to swallow.

There will be reams of analysis over the coming days, and no shortage of long-suffering PRs pumping out commentary on every aspect of this Budget (somebody spare a thought for the PRs!) but ultimately this was a budget for technocrats and not ideologues – and that is a good thing. All the major indices are in their fourth consecutive day of declines, with the FTSE 250 down 3% today, but refreshingly, it isn’t the Chancellor’s fault on this occasion.

Hunt is doing exactly the job he was put in post to do – provide some semblance of stability in one of the most volatile operating environments the markets and companies have seen in decades.

Peter Lineen
Director, Health on what the budget means for health.

For health, as with most of the big spending departments, the fiscal direction was broadly determined at the last Autumn Statement. This budget was largely used to tie up a few loose ends, the loosest of which were the changes to the pension arrangements of senior doctors. This has been a real issue in the NHS, very tangibly impacting swathes of our most experienced clinicians, but one that’s largely played out away from the national headlines. The chosen solution is expensive, controversial, and already causing a stir. A Chancellor less closely identified with NHS workforce issues might have ducked it, but Hunt is hoping it will at least stem the tide of senior clinicians choosing to sell their labour to an increasingly diverse range of non-NHS providers.

Beyond that, most of the wider NHS workforce measures were held back for another day. The Treasury have already agreed to a substantial uplift in funding for medical training as part of a wider programme of demand modelling, workforce development and reform. DHSC and HMT collectively chose to give that its own time in the sun, rather than being subsumed into the din of budget day. More prosaic changes to the drug licencing process will be welcomed by the pharmaceutical industry, the first tangible regulatory dividend after all the upheaval of separation from the European regulatory orbit.

Overall, this was not a budget that will substantially alter the course of NHS performance ahead of the next election. With so much of NHS policy and strategy now set by the NHS itself, today’s measures were largely in keeping with that more reduced role for political leadership. Yet with NHS performance an issue of such prominence, those politicians are hoping and praying that the work already set in train starts to bear fruit soon.

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