The Gryphon Guide to the Spring Budget
Early March 2024: lilac crocuses are out in clustered splendour, canary daffodils pushing through once-frozen earth, premature easter eggs lining ever-eager supermarket shelves, and Guinness taps ready for the heady rush of March 17th.
And there’s only one thing this can mean.
Oh yes, it’s the event you’ve all been waiting eagerly for, pulling you through the depths of hostile Yorkshire winter, that’s right…finally… its the Spring Budget.
Today, Wednesday 6th March, Conservative chancellor Jeremy Hunt formally announced the Spring Budget. This comes less than 4 months since the sweeping Autumn Statement which outlined over 100 ‘growth measures’ intended to boost the struggling British economy.
The key measures of the budget were as follows:
- A 2p Cut to National Insurance
Whilst this cut had been teased through press leaks before the budget, Hunt waited until over an hour into his speech to officially announce the tax cut and it was met with much noise in the chamber.
National Insurance is one of two taxes paid on wages, the other being income tax. The cut means that employees will pay less of their pay checks, from 10% to 8% and follows on from an earlier 2p NI tax cut last autumn. Employees start paying National Insurance on income above £242 per week. Hunt said it would save the average employee around £450 per year.
In mindset, though whilst constrained by economic practicalities, Hunt is a firmly low-tax Conservative. However, it has been said that the tax to National Insurance was chosen because it is considerably cheaper to an alternative income tax cut.
National Insurance cuts reflect a change from Boris Johnson’s Conservatives, who were more comfortable with a larger state and had actually planned to increase National Insurance to 13% in order to fund sweeping social care reform. Hunt’s tax changes come just over 4 years since Johnson’s 2019 manifesto which said social care reform plans “[have] to be able to survive long-term”, begging the question of whether social care has fallen from the Conservative’s agenda.
Hunt said this tax cut was part of his plan to achieve a “high skill, high wage economy, not dependent on migration”.
- Windfall tax extended
A tax on oil and gas was imposed in 2022 after the onset of Russia’s war in Ukraine led to energy companies making large profits than normal. It was previously set to end in 2028, but the Chancellor extended the tax until at least 2029.
- A freeze to Alcohol Duty
Alcohol duty is a tax paid by producers and importers of alcoholic drinks. This impacts drinkers as often, these costs are passed on to consumers in higher prices.
- Vape tax
The government is continuing its crackdown on cigarettes and vapes, with the tax joining already announced measures including an upcoming ban on disposable vapes and a ban on anyone born after 1st January 2009 ever buying cigarettes.
- Restrict ‘non-dom’ status
Hunt addressed the controversial ‘non-dom’ status. This refers to UK residents who claim to primarily live outside of the UK, and did not have to pay tax on income earned abroad. In 2022 they were the object of much scrutiny after it emerged that Akshata Murty, Rishi Sunak’s wife, claimed non-dom status.
Hunt did not promise to abolish ‘non-doms’ entirely, but rather to change the scheme so those who qualify don’t have to pay tax on their earnings out of the UK for the first four years, and then must pay tax on all earnings if they remain in the UK. He claimed to be balancing fairness with ensuring the UK remains competitive for foreign investment and entrepreneurship. Hunt said this was forecasted to raise £2.7bn a year.
Abolishing ‘non-dom status’ is a measure strongly promoted by Starmer’s Labour Party, and was met with much noise. The speaker paused the Chancellor to quell this, describing the rowdy MPs as “impossible”.
Hunt situated these economic measures in an overview of the British economy. Whilst much of this veers into economic jargon best left to a certain corner of campus…the following is an overview of some of the most important parts of the Chancellor’s economic overview:
Inflation: Current core inflation, meaning including costs like energy, is at 5.1%. Inflation is falling, compared to its peak of 11.1% core inflation in October 2022, a figure which raised alarm as being the highest inflation since the staggering 24% inflation in 1975.
Hunt was eager to emphasise how this achieved one of Sunak’s 5 pledges: “Halving Inflation”. The other pledges, including reduce national debt and cut NHS waiting lists, have so far been less successful for Sunak’s government.
The inflation figure means that whilst prices are still rising, they are rising at a slower pace than before. In addition, to offset inflation the government announced wage increases last autumn in attempt to make people’s money to go further.
Wage increases: Not quite understanding the meaning of ‘April Fools’, the government is raising both the National Living Wage and the National Minimum Wage on the 1st April 2024.
The National Living Wage, which will now apply to over 21s not only over 23s, is set to increase by £1.02 from £10.42 to £11.44 an hour. The change in minimum age means more people of typical undergraduate age will be covered under change. Increases also cover 18-21 year olds, as the Minimum Wage is going up by £1.11, from £7.49 to £8.60.
Labour, the official opposition party, have a right to respond to the budget in parliament. Starmer undercut Hunt’s optimism by pointing to the relatively weak British economy: an economy with low growth rates, high national debt and which in mid-February was announced to be in recession, meaning low growth and high debt alongside rising unemployment.
Starmer called the budget “the last desperate act of a party that has failed”. The budget occurs in an electoral context where many expect the Conservatives to be fighting, and perhaps already losing, an uphill battle. The latest YouGov polls say that Labour has a 26 point lead on the Conservatives: polling at 46% versus 20%, with the remainder split between Reform UK, Liberal Democrats, the Green Party, and the SNP.
