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View from the Street: Hunt’s lacklustre budget aims to avoid Tory massacre

CATHERINE MACLEOD

Senior adviser

It is unlikely Jeremy Hunt will ever admit his budget had as much to do with the fortunes of the Conservative Party at the imminent general election, (whether it’s held in May, November or January 2025) as it had with the good of the country. But as the hours pass since he sat down in the House of Commons it is becoming ever more apparent that it was.

Although millions of workers will pay more tax, those in work earning more than £19,000, and the self-employed, will benefit from the 2p National Insurance cut.   

This was a notable change of emphasis: from pensioners and the wealthy to the middle class.  

Hunt chose to lift the threshold at which middle-income households are obliged to pay back child benefit, and he chose to play populist cards freezing fuel duty and duty on alcohol.  Since pensioners and the wealthiest were the losers, it is reasonable to ask if Hunt has taken a gamble, convinced these two cohorts will stick with the Conservatives come what may? 

Whatever gloss the chancellor tries to attach to the tax regime, taxes are high and still going up.  According to the respected Institute for Fiscal Studies (IFS), the public, on average, will be worse off at the end of this UK parliament than they were at the beginning. 

This will be the largest post-war tax raising parliament since 1948, and at this stage it is hard to rule out further tax rises after the general election. Many people are paying more tax because of fiscal drag thanks to frozen tax thresholds.  Until they are defrosted, taxes will continue to rise. Will this be an obvious go-to area for whoever is chancellor after the general election? 

Whether it was virtual signalling or not Hunt hinted at ambitions to do away with National Insurance altogether, but today conceded this wouldn’t happen any time soon. Rachel Reeves, the shadow chancellor, described it as a “bigger unfunded commitment to tax cuts than even Liz Truss and Kwasi Kwarteng tried”.  

The two glaring omissions from the Budget were any plans for growth or a focus on public spending. They are inextricably linked: without growth the country faces draconian cuts in the public sector.  Even with growth, the public sector will struggle for years after the election. The difficult conundrum facing whoever is in government next will be how to fund public services. The Office for Budget Responsibility (OBR) today accused the government and the opposition of a “conspiracy of silence”, not having an honest debate about the challenges coming down the track.  The IFS is suggesting £20 billion of cuts will be needed if the books are to be balanced. 

Hunt pinched Labour’s stated policy of abolishing the non-domicile tax and extended the windfall tax on oil and gas.   It may have seemed smart at the time, stealing Labour’s thunder, but it will come back to haunt the Tories. The priority for business and industry is certainty.  As Rachel Reeves strains every political sinew to win their trust, Hunt has played fast and loose with the tax regime hoping for political gain. That he was prepared to infuriate his Tory colleagues in Scotland at the same time seems strange indeed. 

As a result of Barnett consequentials, the Scottish Government will get a boost of nearly £300 million.  It is not ring-fenced so the Scottish Government can spend it to suit their own priorities.  In addition, the Chancellor announced £10m for the SaxaVord spaceport on Shetland; £20m to help regenerate Arbroath, Peterhead and Kirkwall; levelling up funding for Perth and Dunfermline; and an extension of the investment zones programme in Scotland from five to ten years.