06 Mar 2024

Political Insider: Spring Budget, 2024

In a statement with all the rhetorical hallmarks of a pre-election budget, Hunt sought to square the Conservative principle of “lower taxes mean higher growth” with a tax burden that, nevertheless, remains on track to hit a post-war high.


It has become commonplace for details of a budget to be ‘leaked’ to the press before being formally announced to Parliament, save for one or two ‘rabbit out of the hat’ policies intended to woo voters. While we saw multiple leaks, many have been left wondering where the rabbit was hiding in today’s announcement.

After 14 years in government, the Conservative Party has been accused of lacking fresh ideas on how to meet its self-allocated priorities – being ‘rabbit-less’, if you will. Arguably, this is reinforced by its pinching of Labour’s policy on reforming rules for people with non-domiciled status in the UK today.

Jeremy Hunt spoke often of the need for lower taxes as a stimulus for economic growth. He announced as ‘tax cuts’ the freezes on fuel duty and alcohol duty, additional ‘expensing’ relief for businesses, stamp duty relief, reducing the higher 28% capital gains tax rate for residential properties and – as his headline actual tax cut – a 2% reduction in employee national insurance (NI). In conjunction with the 2% NI cut introduced after the Autumn Statement, the Chancellor argues this will provide 27 million employees with an additional £900 a year.

Notably, the basic rate of income tax was not cut – a measure which would likely have had greater cut through with voters. Nor were changes made to the tax thresholds, which have been frozen in cash terms since April 2021 and have resulted in thousands of earners being dragged into higher rates.

Hunt made much of the latest forecast from the Office for Budget Responsibility (OBR) which predicts inflation will drop below the Conservative’s 2% target “in just a few months’ time” – nearly a year earlier than previously forecast. This, argued Hunt, is proof that the Conservative’s plan for long-term growth is working, and that voters should stick with the government at the next election.

Time will tell whether Hunt’s announcements have done enough to turn around the Conservative’s electoral fortunes – in other words, are the additional cuts to NI enough of a rabbit?

At a glance, the core measures announced by the Chancellor today:

  • Main rate of employee NI contributions cut from 10% to 8%
  • For the self-employed, main rate of Class 4 NI cut from 9% to 6%.
  • Abolishment of non-dom status
  • High Income Child Benefit Charge threshold raised to £60,000
  • Freeze on alcohol duty
  • Five pence cut to fuel duty maintained and rates frozen for the fourteenth consecutive year
  • Cut on capital gains tax on residential property sales
  • Increase in the VAT registration threshold for small businesses, from £85,000 to £90,000
  • £2.45 billion for NHS support and reform, alongside new £3.4 billion productively plan
  • A new duty on vapes
  • New British ISA to be introduced
  • Scrapping of the furnished holiday lets regime
  • Military spending to rise to 2.5% of GDP “as soon as economic conditions allow”
  • Maintaining of 1% increase in day-to-day public spending above inflation
  • £160 million invested on two nuclear sites and £120 million for green industries to develop technologies
  • Windfall tax on North Sea oil and gas companies to conclude in 2029

The political impact of today’s budget for the Conservative Party.

Mario Creatura, Director, Public Affairs and former Conservative Downing Street Special Advisor

There is significant demand for greater public spending, from a public that also hopes for much-needed tax cuts to ease the cost-of-living burden. These are two tricky, bucking horses that the Chancellor today attempted to ride simultaneously – all compounded by a Parliamentary party that want him to do more of everything, to have done it yesterday, but without any real consensus on what ‘everything’ actually entails. It’s that lack of political clarity that has made this Budget more challenging for the Chancellor than otherwise would or should be the case.

With the 2p cut in National Insurance, a cut in fuel duty, reforms to childcare and VAT support for SMEs, Hunt will be hoping that tonight’s headlines will reward him with positive tax cutting coverage.

But it’s the political manoeuvrings on scaling back the non-dom tax regime and extending the tax on oil and gas company profits that may be more significant over the coming months. Both were similar to proposals Labour pledged to implement, with the resulting funds being used to fund a variety of measures. Shadow Cabinet spokespeople have been at pains to say the extra spending commitments won’t change, even though they’ll need to desperately source the funds from elsewhere.

In true pantomime fashion Labour have thrown their toys out of the pram over this. How dare a politician seek to play politics at one of the key political moments in the calendar! Yet these howls of injustice will come to nothing as the inquiring narrative from their opposition and press are already asking: how will you fund these cast-iron pledges now? What taxes will go up or services will be cut?

These core questions are designed to expose a key battleground over the coming months. Who is to be more trusted on the economy? The Conservatives with their recent turbulent fiscal performance or Labour, with a plan but no way to pay for it?

“Great Budgets change history,” proclaimed Jeremy Hunt shortly before he stood at the Despatch Box today – he will be hoping that his Budget boxes Labour into a corner, one that gives the Conservatives the edge they need to get back in the General Election-winning game.

The political impact of the budget for the Labour Party.

Josh Kaile, Public Affairs, Associate Director and former Labour Party advisor

The Chancellor used a lot of words in his speech, but ‘recession’ was not one of them. Indeed, you would be forgiven for forgetting that the UK is actually in a recession right now.

But never fear, Keir Starmer was only too happy to remind the country of ‘Rishi’s Recession’ when he stood up to respond to the Budget.

Labour’s attack on the Tories has centred around the government delivering the highest tax burden in 70 years. Keir made sure to remind anyone listening that taxes are rising, prices are soaring and mortgages are higher. People across the country are feeling worse off, not better.

So, the question today is whether Jeremy Hunt has been able to challenge that narrative and show that the Conservatives are tackling the cost-of-living crisis and making people feel better off.

Will people feel better off from a 2p cut in National Insurance? Will people feel better with a freeze in alcohol and fuel duties? The Chancellor is gambling that they will.

The opposition’s pitch is that a Labour Budget would be focused on creating decent jobs, building 1.5 million new homes and the industries for the future. In a word, it’s about ‘growth’.

Keir also pointed out that if the Tories really did believe in ending the ‘non-dom’ tax break, other than using it for political manoeuvring, they would have introduced it years ago. They could have delivered 3.8 million NHS operations or provided free breakfast clubs for schools across the country.

Instead, he claims the government are putting the Conservative Party first and the country second.

The Leader of the Opposition ended the political give-away session from the Chancellor by calling for a General Election on 2ndMay. I suspect this will see the Prime Minister being followed by a life-sized chicken when he inevitably fails to deliver. We may be months away from an election now, but the campaign has well and truly started.

The City’s reaction

Charlie Barker, Managing Director, Capital Markets

Ever since former Chancellor Kwasi Kwarteng’s infamous not-so-mini Budget almost downed the UK bond markets 18 months ago, his successor has taken care to avoid spooking markets. So it was no surprise that today’s announcement from Jeremy Hunt was in line with the headline measures leaked to the media in recent days.

But there was still some new news for the City to cheer.

Beyond the rosier than expected growth forecasts from the OBR, ears will have been pricked by the announcement of a new “British ISA”. The measure, which had been long rumoured, will allow savers an additional £5,000 to invest tax-free each year as long as they put that money into UK-listed shares.

That will have pleased many in the City who have been lobbying for such a move in recent months to boost demand for UK stocks. But they may have also been disappointed by what was absent. There was, for example, no sign of a move to scrap stamp duty on buying shares, which critics argue puts off international investors.

As the Chancellor raced through the rest of his section on City reforms, there may have been a sense of an opportunity missed. However, the initial reaction of the UK-company focused FTSE 250 Index – moving to its highest level of the day, up 1.2% by the end of his speech – suggests that overall the City reaction has been a positive one.

Health Insight

The health policy community were not expecting much in terms of health and social care in today’s Budget, with the Chancellor intending to cut taxes ahead of the next General Election. However, as part of his plan to drive investment for ‘more jobs, better public services and lower taxes’, Jeremy Hunt announced investment into the life sciences sector and the NHS.

NHS productivity has been a hot topic, as more money is being spent on the NHS compared with pre-pandemic levels, yet fewer patients are being treated. Therefore, Jeremy Hunt’s plans to fully fund an NHS Productivity Plan will be welcomed. The £3.4 billion investment aims to modernise the NHS and make their IT systems more efficient, which the Chancellor noted would help unlock £35 billion in costs savings. This funding will:

  • Streamline operations by reducing 13 million hours lost due to IT system inefficiencies
  • Use AI to significantly decrease form filling by doctors
  • Digitise operating theatre processes to enable an additional 200,000 operations annually
  • Utilise AI to help doctors read MRI and CT scans more quickly, speeding up results for 130,000 patients per year
  • Enhance the NHS app to manage appointments effectively, potentially cutting missed appointments in half

It is promising that the narrative ‘invest to save’ is being utilised in this instance, as we recognise decision-makers are not always able to consider the longer-term benefits of upfront investments – be it digital technologies, capital infrastructure, or more innovative medicines – with the NHS experiencing significant financial pressures. However, whilst the Chancellor has kept the 1% real terms growth increase in public spending and increased funding to the NHS, health is more than the NHS. He has reversed planned increases to NI from earlier budgets planned to fund social care – potentially leading to delayed discharges from hospital – already a major brake on improvements in NHS productivity. In addition, whilst the Chancellor has provided additional funding for hospital care through diagnostics and surgery under the public service productivity plan, productivity in the NHS is also improved by preventing people from becoming sick – and there has been no extra funding for those services.

While no additional funding has been provided to stop people becoming sick, Jeremy Hunt has announced the UK Government’s decision to implement a tax on vaping and e-cigarettes. With the aim of discouraging non-smokers from taking up vaping, Mr Hunt confirmed the introduction of an excise duty on vaping products starting 26th October, along with the publication of a consultation on its design. Recognising the potential of vapes to aid smoking cessation, the Government will simultaneously raise tobacco duty to maintain the financial incentive for individuals to choose vaping over smoking. This tax on vaping and cigarettes will be welcomed, but the simultaneous freeze of the alcohol duty – another risk factor for many diseases – may seem incoherent policy to those interested in prevention.

For Life Sciences, Jeremy Hunt outlined the £45 million allocation towards medical research aimed at the development of new treatments for conditions including cancer, dementia, and epilepsy. This funding will be complemented by a significant boost to the UK’s pharmaceutical manufacturing capabilities, with a £650 million investment by AstraZeneca. This investment is earmarked for the establishment of a new vaccine manufacturing hub in Liverpool, and the expansion of their biomedical campus in Cambridge. This additional investment, beyond those outlined in the Autumn Statement, indicates that the election period will not lead to a dramatic break in policy toward the life sciences.

Further information

MHP will be keeping you up to date with the latest news and analysis in this important election year. Please contact [email protected] (Public Affairs) or [email protected] (Health) for further information.

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