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In this Insights In Focus episode, we discuss the contents of the 2024 Spring Budget and their likely impacts on the UK economy.


Philippa Lamb 


  • Iain Wright, Managing Director, Reputation and Influence, ICAEW
  • David Williamson, Political Editor, Sunday Express
  • Frances Haque, Chief Economist, Santander UK


Philippa Lamb: Hello and welcome back to the In Focus podcast. I’m Philippa Lamb and today we’re combing through the announcements in the 2024 Spring Budget. Now, we’re recording this a day after Jeremy Hunt delivered his fiscal event against a backdrop of recession and persistent inflation. While the chancellor did have better than expected headroom for delivering tax cuts, the UK economy and public finances are still navigating a perilous tightrope to recovery. And in the midst of a general election year, will anything announced yesterday actually have an impact on public sentiment?

To discuss these big topics I’m pleased to say we have our economics and politics SWOT team back with us. Frances Haque, Chief Economist at Santander UK, David Williamson, Political Editor at the Sunday Express, and Iain Wright, ICAEW Managing Director of Reputation and Influence. Welcome back, everyone.

Now the Budget’s strengths, weaknesses, opportunities and threats – as I said, we’re here to discuss them all! Before we get into the details, Frances, would you just recap for us on where the UK economy is right now?

Frances Haque: Well, actually, probably some positive news in the sense that we already think that we’ve left the recession from last year behind us. The survey data that we have from companies suggests that we should have some economic growth for Q1, albeit low, but still growth nonetheless. We’re still seeing unemployment at very low levels. We’ve got real wage growth, although that doesn’t of course mean that purchasing power has fully returned to previous levels but definitely positive there. And inflation, of course, is falling, and we should get to the 2% headline rate in April. We won’t, of course, know this until May, but slight caveat on that is that services inflation is still very sticky, and with wage growth still above 3% level, to get us back to the headline rate of 2%, it may well mean that actually, although we’ve got the drop this year, things may pick up a little bit in terms of inflation next year. But it’s a far more positive start to 2024 than we had for 2023.

PL: And the Office of Budget Responsibility, they’re predicting… it’s 0.8% growth this year, aren’t they, and 1.9% next year?

FH: Yes.

PL: How reliable are those figures, Frances?

FH: I think the next year’s growth is a little bit on the toppy side, but certainly this year’s growth is probably more in line with consensus expectations. And yes, obviously, one never knows quite how 12 months is going to go, so 24 is always a bit of a challenge, but I certainly think that things seem to have improved slightly in terms of where we were, looking at November’s numbers.

PL: What about the public finances? We heard a lot, didn’t we, about the January record surplus – £16.7bn. Is it a drop in the ocean really then?

FH: Yes, it is really, at the end of the day. I have to say, though, that the £16.7bn was actually lower than the OBR’s estimate for January. What it does do, of course, is highlight the fact that there’s a lot more people paying tax, and that’s mainly due to the threshold freezes, but at the end of the day it’s the spending that’s the most important. That’s the crux of the issue. It was interesting that whilst Jeremy Hunt obviously said there would be no cut to the 1% spending increase, we’re still going to see a lot of cuts coming when we do have the spending review, which he’s now said won’t be until the next parliament.

PL: Iain, Frances has mentioned a couple of things. But do you want to just run us through the main policies announced yesterday. We don’t need to get into everything, but the most significant ones from your point of view?

Iain Wright: Well, clearly the most significant one, and the one that the chancellor’s banking on will give him a bit of a bounce in the polls, is the cut to national insurance. The argument being that having more money in people’s pockets, in people’s wallets, will encourage them to have a feelgood factor, making sure that people go out and spend. And I think if we’re looking as to where growth is going to come from – and maybe we’ll come on to this, Philippa – it doesn’t seem to be coming from business investment, it certainly doesn’t seem to be coming from trade and the export market. The chancellor’s banking on the combination of maybe more in your wallet and purse as a result of the national insurance cuts, both the ones announced yesterday and in November, lower than expected inflation, maybe lower interest rates faster than expected. People might go out and spend. Certainly, there’s that element. He’s also tried to tackle some things regarding the high income child benefit charge. But ultimately, Philippa, do you know what, there’s an awful lot in it but there’s not a big theme. That was the thing that was really striking as such, there’s not an awful lot… I didn’t see a rabbit being pulled out of the hat. Now, partly that was because a lot of it had been trailed beforehand – some of the lobby correspondents could perhaps have read out the Budget statement rather than the chancellor – but actually, in terms of… where was the surprise, where was the big game changer, there wasn’t really one.

PL: David, do you think the public really grasp these national insurance changes in the same way as… a cut in income tax is immediately understandable, isn’t it? It translates potentially into votes. What’s your feeling about that?

David Williamson: This is one of the big worries is that people don’t really understand what national insurance is. It’s something that they see on their pay cheques but it doesn’t have the cut-through that income tax has, because there’s probably lots of people who don’t pay income tax that think they do pay income tax. People don’t walk around saying I just wish my national insurance was lower.

We had a fascinating poll a few days ago. We asked people what they actually wanted to see from the Budget. Fifty percent of people were saying more money for the NHS and only 20% were saying a cut in income tax. So if people link national insurance to actually funding good things… back to its original aim at the start of the welfare state… it’s a hard sell for the spin doctors to actually get it across that this is what it is, it’s actually a major drain on your income, you are going to be significantly better off.

They’re doing a very good job of talking about a tax on work. That is something that cuts through.

PL: Yes, that’s a new phrase, isn’t it? I hadn’t really heard that before, I don’t think.

DW: And they’ve got this concept of double taxation and how it’s unfair to be taxed twice. The problem is that in floating the idea that national insurance itself could be abolished, they’ve inadvertently terrified a lot of pensioner campaigners, who say, hang on a second, lots of us – because of the frozen thresholds – are now paying income tax for the first time, more and more are coming on, despite the triple lock and all these things that we’re supposed to feel so grateful for, we’ve actually got high numbers of people dealing with pensioner poverty, lots of big things on the horizon, and a whole generation of new pensioners coming through, many of whom won’t have as generous pension schemes and subsidies. So they say, we’re actually braced for massive, massive problems. And a cut to national insurance does nothing to help us. And given that pensioners are the lifeblood of the electorate when it comes to people who actually turn out and vote, this is a major headache, not just for the Conservatives but also for Labour, because they’re going to have to essentially make the same arguments about by supporting a cut in national insurance it’s actually going to lead to more people working, but if you can’t work, that’s a harder sell.

PL: Yes, as you say, this concept of fiscal drag, this business of tax thresholds being frozen, obviously Labour… the shadow chancellor’s making much of this now. There’s been a lot said about it. And it’s a problem, it’s not going to go away, is it? It wasn’t tackled, it does affect a lot of people.

DW: That’s doing a lot of hard work. Given that… we’ve had the IFS analysis, which is some of the most sobering reading when it comes to the long-term state of the finances, it would be a brave and radical chancellor who could actually get the thresholds back to where they would have been if they hadn’t been frozen. So it’s very hard to see how that goes forwards.

And it’s interesting that in an election where we’ve got two very, in the best sense of the word, managerial sets of leaders for both Labour and the Conservatives, it’s actually going to be who can come up with a credible way forward to give people a sense that they’re going to be feeling better off when the public are all hugely aware of actually just how tight the funds are. So there’s a lot resting on Rachel Reeves’ shoulders. And even more so after the surprise news about non doms and things, which you almost suspect were done with an element of glee to cause chaos in Rachel’s office.

PL: And presumably have done exactly that?

DW: Absolutely. And I think the Conservatives reckon that one of the areas where Labour are vulnerable is Labour need to have some grand ambitions and visions of change, but it’s a question of how do you pay for that? And if the public know that there isn’t any money left it’s quite a powerful attack point to say, well, then you’re either talking about tax hikes or borrowing. And this is what the country will be hearing a lot more over however how many weeks or months there are until polling day, definitely.

PL: All in all, you, I’m guessing, were there, David, and watching with all the other correspondents. What was the sense, as it were, amongst the journalists in the room? Just everything they heard, they knew they were going to hear – there wasn’t anything really unexpected, was there?

DW: It was a bit like if you go to the theatre and you’ve read the scripts beforehand. There’s still a sense of drama. But the one… some of the things which hadn’t been trailed as clearly as others, centred around, for example, the child benefit charges, which is the type of thing where it’s a narrow section of the population, but it could be quite influential in a lot of the Lib Dem/Tory facing seats. In particular, there’s a lot of people who suddenly find themselves for the first time filling out a self assessment form because one person has tripped over the thresholds. So the rise of the threshold there, it will actually be noticed.

That was one of the biggest things: how do you do a Budget which actually changes people’s day-to-day lives and awareness? Lots of people, middle class, got onto the housing ladder, got a lot of expenses, a lot of those couples are suddenly going to be: oh, something’s happened and we have a bit more money, or I no longer have to worry about that. And there’s the long-term prospects of changing it to being based, instead of on one individual’s earnings, on a household’s earnings. And that’s a big logistical challenge of how on earth they’re actually going to assess that. But it’s a major, major victory for the social conservatives in the party, who have been campaigning behind the scenes like billy-o on this issue. So people like Miriam Cates and so on, they can actually go back to their constituencies and say, well, that was a bona fide success.

PL: Iain, what is your feeling? There was limited room for manoeuvre, wasn’t there? We weren’t really expecting to see anything radical, and indeed we didn’t see or hear anything radical. But looking at it in the context of the previous Budget, which was supposedly a “Budget for growth” – we haven’t really seen that, though Frances has outlined obviously there’s some room for optimism now. We heard a lot from Jeremy Hunt, and he used the words ‘productivity’ and ‘growth’ a lot, but we haven’t seen much that’s really going to make that happen, have we?

IW: No, and actually what I found really interesting and I hadn’t seen it mentioned in such stark terms until yesterday, was some of the analysis from the OBR, where it said, look, we’ve got a much larger population, but we’ve got broadly flat economic output. So that’s actually, in terms of the number of workers making things, per hour per worker, however you want to define productivity, it’s going down. And interestingly as well, you’ve got a larger population, but you’ve got lower labour participation as well, and again, that’s going to be a drag on potential growth.

I said earlier, Philippa, that there wasn’t really a theme. That’s slightly unfair on the chancellor, because I think some of the two big measures – I mentioned national insurance cuts and I also mentioned the high income child benefit charge – are trying to encourage people, to work, to work more, to strive for ambition and try to avoid those cliff edges. There’s a coherence there in terms of making work pay.

Now in terms of whether it’s going to move the dial, I remember speaking in the last podcast with you after the Autumn Statement, he did everything right, making sure that… putting expensing of capital allowances permanent, making sure there’s that certainty, but it wasn’t going to move the dial whatsoever. What on earth does he have to do to kickstart growth?

I think there’s a similar theme emerging from yesterday’s Budget, which is trying to put things in place, trying to do things like move the VAT threshold to avoid cliff edges. And business investment is forecast to go down by 5.1% this year. He must be tearing his hair out, saying, what on earth do I have to do to kickstart what is, frankly, a stagnant and moribund economy? And whoever is chancellor will have to face the same difficulties.

PL: Yes, as you say, there were one or two measures, weren’t there, directly aimed at businesses? There was the moving the VAT threshold out to 90,000 from April, wasn’t there? There was the government loan scheme for small businesses extended another year, was that right, until March 2026? What about the full expensing on leased assets, Iain? Is that something that everyone knew was coming so it’s not really going to make a significant difference?

IW: I think it could have some difference. It’s not going to move the dial that much. This was very much focused, I think, on how do you get a feel-good factor? And he focused very much on people in work, those… politicians would say, hard-working families, those who are not top earners but are doing all right but because of inflation and because of interest rate hikes over the past 12 months or so are really feeling the pinch and going, hang on, I’m working really hard and I’m not seeing any benefits. He has focused this Budget and the last Autumn Statement in November very much along those lines, rather than maybe condition this with what he did with permanent expensing in the Autumn Statement, rather than on business measures.

PL: Frances, having talked to you a number of times in the past, you’re always very, very focused on long-term growth, long-term productivity. Were you disappointed not to see more?

FH: Yes, it would have been nice, but at the end of the day he didn’t have a lot of wiggle room. You only have to read the OBR report to know just how little there is, even by the end of the five-year period. If any of the risks… potential geopolitical risks and things like that emerge, then it has gone. But the one thing I would say was, I was quite pleased to hear about things like the productivity plan that they’re putting in place for the NHS.

PL: Yes.

FH: And that… it was more around… I mean, I’m not saying that’s going to move the dial, it certainly won’t in the next couple of years, I don’t expect, it takes a long time for these things to come through. But the fact that they were focusing on how can we use AI, what can we do to try and start actually moving the dial from a public service perspective to try and help with spending? Because at the end of the day, we are stuck. Even if we do grow that bit more, one, it’s going to take time, and it’s well, how do we deal with the spending issues we’ve got now? We all know that there’s an issue, and it’s very difficult to see a way through that. So in that respect, it was quite pleasing to see, at least there would seem to be a plan in place, they’d thought about it and this is what they’re aiming to do. So I was quite pleased about that.

IW: Philippa, can I just address Frances’s point there, please?

FH: Yes, of course.

IW: I was surprised too in seeing the NHS workforce plan put in place. And in a general election year, in terms of putting billions of pounds into the NHS, I thought it was quite striking that it wasn’t about increased doctors and nurses or dentists. And in many respects, he’s done the right thing for the long-term health of the NHS – let’s make sure it’s got a productive workforce. I wonder whether he’s setting a trap for any future government in terms of to stop that, in order to get some wriggle room for their own plans, whether that is going to have to be cancelled. But in the overall scheme of long-term, economically rational decisions, it was pleasing to see.

PL: I was intrigued by that, because some of us, including myself, are old enough to remember the last time a government tried to tackle digitisation of the NHS and the bill was vast. And then the project was written off in the end, if I remember rightly. This is going to be an incredibly expensive and long-term project, isn’t it?

IW: And in terms of the wider Whitehall picture, if you take into account two big spending commitments that any government can’t really get away from, one is the NHS, certainly with an ageing population, and then with this commitment about the workforce plan and productivity, but also very mindful of the war in Ukraine and making sure that we fulfill as a country NATO’s commitment of spending 2% of GDP on defence – if you take those things into account, there’s not much else for other departments, and it’s looking like round about a two and a half percent cut in the next parliament for other departments.

And of course, I think Frances and David both alluded to this, he’s front-ended tax cuts but he hasn’t put in place any tax and spend commitments for the next parliament, which… no comprehensive spending review, there’s no idea about what the spending plans will be, which sounds like large departmental cuts and/or big tax rises as well.

PL: This all takes us to speculation on the date of the general election, doesn’t it? There’s still the odd rumour floating around about May, but what does everyone think? David, that doesn’t seem very likely, does it?

DW: It doesn’t. That was… One Tory that I saw immediately, his response was, oh well, we’re definitely not having a May election. But then again, Downing Street infers… there hasn’t been an absolute, colossal wiping out of the possibility. There’s been these rumours that this was very much designed as a Budget that, if needs be, could be sold.

Having said that, the actual Tory machine has been from the word go pouring cold water on any notion and emphatically stating that, as Rishi himself says, the second half of this year is when they’re doing it. At the same time, Labour MPs are running around getting their photographs taken for their leaflets this week.


Quite genuinely, all of the logistical stuff. They are told to be ready. But then you have people thinking that this is some sort of fourth dimension chess, where the Tories are getting Labour to spend their money now… You wouldn’t believe this. Then there’s the talk about party conferences, will they take place? And throwbacks to John Major in 1992 and to his budgets, and to then actually say to the country, oh come on, do you like what you see? And in 1992 that worked. I think the terror is that it will be ’97, where actually they put a Budget in that actually sets the economy up to hum very, very nicely and the red team get the credit for it. That’s the horror show that’s lurking in people’s minds.

The one thing that, if it does happen, that inflation drops below the target – which, I mean, a year ago how many of us thought we’d be even talking about this, you’d have asked to take one’s temperature – if that does happen, that’s something that they can point to quite seismically and say, look, it’s working.

And the phrase which we hear all the time about tax is direction of travel, which doesn’t sound very gripping but I think this Budget was very much set up to try and convince people that we are yearning to do more, and that given another chance we will try and get us a bit further.

And we had the will-they-won’t-they drama about whether it was going to be income tax or national insurance and that was quite interesting, because this has been one of the most disciplined Treasury and Downing Streets that I’ve ever seen. Think back to the astonishing relationship between George Osborne and David Cameron and again, you just compare it to Blair/Brown pyrotechnics and all the things that we have seen in the interregnum in recent years. Normally message discipline has been incredibly tight, but that notion that you had this push for income tax cuts, that’s actually potentially quite helpful, because it sends out a message that, okay, you’ve got the national insurance cuts, but their hearts were yearning to do more, but their prudence stopped them from doing it at this time. But on the horizon is a world where inflation is below 2% and who knows what might happen? That’s the type of thing… the IFS analysis and so on, it’s like, what…! If things are not going to be getting any easier. However, it’s a message and it’s an aspiration and it’s a sensibility which is being broadcast out. And this is in the hope that that can cut through and connect with people. Because then that… the refrain that we’re hearing from a lot of cabinet ministers is, well, what’s Labour’s plan on X? I think you’ll be hearing this every single day for however long we go.

The pressure for them to deliver spending plans, and they cut across, well, where are yours? Where’s your spending review? Why isn’t that happening now? But it’s still one of the most powerful things that a government can say to an opposition is, how can you pay for this? People have been through the pandemic, they’ve been through the energy crisis, we’ve still got the effects of Ukraine, show us how you’re going to do it. The terrible thing is, in an election, if hope can’t get people galvanised, then fear might do.

IW: I get the impression, strong impression, that Labour front benches are absolutely convinced the next general election is on 2 May. And so that’s where I would agree with him. Having seen the Budget, I am now – and this is famous last words – I am absolutely convinced that 2 May has been discounted by the prime minister. It’s not going to happen. And I think that for two key reasons. One is, I think the emphasis upon cutting tax on work needs time to flow through, and people feeling better about things, coupled with maybe lower interest rates, lower inflation, get some growth in.

And the second thing is, with the emphasis… with the focus being on national insurance, therefore workers, the government will have to do something with pensioners, core element of their voting base. And they might think, well, triple lock is good enough. But I suspect they will need to do something else in order to make sure that the pensioners feel better as well. So for that reason, I still think we’re talking about a November general election.

PL: Well, we’ll have to get you back on if it turns out to be May, Iain.

IW: I know. It shows my political antenna is very rusty.

PL: It will be very unfortunate at that point. But yes, Frances, I take it you agree? You’re not really expecting to see anything happening in a couple of months on the election front?

FH: No, no, I think they’ll want to wait to see bank rate falling and inflation actually… it should drop just below 2% and that probably would give them some boost, so I would expect them to wait a bit longer. But as you say, Iain, famous last words.

PL: Frances, Iain, David, thank you very much indeed for joining us again. It is always a pleasure to hear your analysis and indeed your predictions.

Our In Focus series returns later this month to discuss the future of the farming sector in the UK and its influence on food security and economic resilience. We’ll have a panel of sector experts with us for that one.

The Insights series for accountancy professionals will be back in early April with news and developments from across the profession and the ICAEW.

Finally, if you work in tax, ICAEW has launched a new podcast you will not want to miss. You can listen and subscribe to The Tax Track for specialist analysis from the ICAEW Tax Faculty on any podcast app, or indeed ICAEW.com/podcast.

Thanks for being with us today. If you’re finding these podcasts useful, why not subscribe to this series right now?

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