Spring Budget 2024

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“The latest Spring budget 2024 from the Chancellor has revealed some positive adjustments to the economic outlook, as well as some targeted tax cuts aimed at boosting the flagging popularity of the Conservative party. However, the overall picture remains one of fiscal restraint and uncertainty, with productivity gains rather than cold hard cash expected to solve the pressures on public services, given little room for manoeuvre in the face of ongoing debt and spending pressures.

“The Office for Budget Responsibility (OBR) has once again revised its inflation forecasts, with inflation now expected to fall below 2% in the coming months, reflecting lower energy prices and subdued demand. This has lowered the government's interest payments on its debt, as well as reducing the cost of some benefits that are linked to inflation.

“The Chancellor has used this windfall to announce some tax cuts, mainly focused on slashing national insurance. He has also maintained the freeze on fuel duty and alcohol duty and made changes to the Child Benefit system which will ultimately see payments expanded.

“However, these tax cuts must be balanced with the £17bn of tax rises that have already been announced for the next parliament, which include freezing the income tax thresholds in real terms and the expiration of other short-term tax breaks.

“Today’s Spring budget 2024 was clearly set with the purpose of reversing the current position the Conservatives find themselves in, given recent polls show the party has the lowest level of support it has seen for 46 years. With much made of the Conservatives’ 100 measures to boost the economy and drive growth messaging at the Autumn Statement, alongside a cumulative £900 average cut in National Insurance payments by employees, one measure – electoral polls – have so far shown no improvement at all. The Conservatives will be hoping that this final offering before the general election will be enough to curry favour with voters and will see that change.

“Labour has insisted that if it were to win the upcoming election it would follow the same set of fiscal rules, going so far as citing it as the reason the £28bn a year green industrial strategy recently fell foul of Rachel Reeves’ red pen. With fiscal rules that require underlying debt as a proportion of GDP to be falling in the final year of a rolling five-year forecast, this ultimately permits the government to have debt rising as a share of GDP for most of the forecast horizon. However, with no explicit departmental budgets published, there is so far no evidence of how this loosest of moving fiscal targets will actually be met.

“With frozen tax thresholds the largest contributor to the rising tax burden, set to drive the number of taxpayers in the higher rate band up by 68% by the end of the OBR’s five-year forecast period, the question remains when these will be addressed – and the answer is still most likely not any time soon.

“Though this is a difficult backdrop for economic growth, there remain reasons to be optimistic. There are early signs of growth beginning to pick up, with business and consumer confidence having improved in recent months. Meanwhile, interest rates are still expected to fall in the coming year, oiling the cogs of the economy just as innovation in sectors such as AI and life sciences has taken a giant leap forward, with obvious productivity benefits that the Chancellor is keen to harness. If these growth opportunities are successfully employed by whichever government is in power by January 2025, then the economy may be able to drive better fiscal outcomes in the years ahead.”

Download the full Spring Budge Summary .

If you have any questions on how the latest budget may affect you, please get in touch - email This email address is being protected from spambots. You need JavaScript enabled to view it. or ring 01792 583807.

Lindsay James, investment strategist at Quilter Investors.

6th March 2024