Starting at 12 30 PM GMT on 6 March 2024, Chancellor of the Exchequer Jeremy Hunt revealed the last-remaining secrets of his much-awaited Budget, many of the contents of which had already been leaked to the press over the preceding few days. The current state of affairs is in stark contrast with the events of November 1947, when the-then Chancellor Hugh Dalton resigned after minor details of his Budget appeared in the Star newspaper the day before it was due to be presented, and also illustrative of the continued erosion of professional standards in public life and an increasing dependence on media manipulation of the facts.
In a General Election year, Hunt’s “underwhelming” Budget appears to have neither totally satisfied the Conservative Party faithful seeking widespread tax cuts but instead facing a growing tax burden, nor impressed undecided voters who foresee cuts to already embattled public services from a fall in government tax revenues. Mr Hunt may, however, have been constrained by the independent Office of Budget Responsibility’s estimate of £13 billion for the fiscal headroom available for delivering any desired tax cuts.
A much-vaunted Budget measure is a cut of 2p in the pound in National Insurance contributions, at a cost of £10 billion, which could save around 27 million workers an average of £450 per year if in paid employment, while the self-employed would gain an average of £350 a year. Income tax was untouched, in the belief that cuts would prove to be inflationary. A continued freeze on income tax thresholds means more people will be dragged into higher income bands as their income rises in line with inflation, thereby subjecting them to a “stealth tax” brought about by so-called “fiscal drag.”
Inheritance tax and stamp duty land tax, two perennial Conservative bugbears, were also untouched, even as stamp duty relief on multiple dwellings was abolished, but the higher rate of property capital gains tax was reduced from 28 per cent to 24 per cent to facilitate movement in the residential property market. The VAT registration threshold for small businesses was raised from an annual revenue of £85,000 to £90,000. The individual earnings threshold at which child benefit is taxed will also go up, from £50,000 to £60,000. But imminent increases in local council tax, from April 2024, will only compound the overall tax burden for ordinary working people. Then there are “sin taxes” to contend with, as a tax on vaping products is set to be introduced from October 2026, to discourage non-smokers from taking up vaping, alongside a one-off increase in tobacco duty to keep vaping cheaper than the more-harmful smoking. To maintain a balance and to support pubs and bars, the freeze on alcohol duty will be extended until February 2025.
Surprisingly, VAT relief for the hospitality and tourism industries and on UK purchases of goods by overseas visitors was not reinstated, thereby disincentivising these potential contributors to the economy. Mr. Hunt even adopted a flagship Labour measure, abolishing tax relief on overseas income and capital gains for UK residents permanently domiciled abroad, only to be replaced by a “simpler and fairer” residency-based system. This action is estimated to generate around £2.7 billion.
Public sector spending will be maintained at 1 per cent in real terms, although the NHS will receive an additional £2.5 billion in the coming financial year, contingent on increased efficiency and productivity. This does not bode well for schools, housing, policing, and other key public services.
The Spring Budget means different things to different people, as reflected in the varying media responses to Mr Hunt’s presentation. Whatever one’s particular viewpoint, there can be little denying that is unambitious and does not go far enough to facilitate economic recovery, to rehabilitate Britain’s crumbling public services, or to strengthen the nation’s left-behind defences. The General Election may yet be decided on the premise that “It’s the Economy, Stupid.”
Ashis Banerjee