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On Wednesday, Chancellor Jeremy Hunt will deliver the 2024 Spring Budget, where he will update Parliament and the public on the state of the UK economy, and announce the Government’s fiscal plans for the upcoming year.
Budgets are always as much about the politics as the economics, but with a General Election on the horizon, this Budget will be designed not just with the public finances in mind, but with the Conservative’s polling deficit to Labour at the front of Hunt’s thinking.
This Budget may well be the Government’s final roll of the dice to win over the electorate before the election.
This will make it an even tougher job for businesses to carefully navigate the policy and political implications of the Budget in the coming weeks, to ensure that their views are heard amongst the competing voices, and policy formation reflects the needs of your organisation.
So, with that in mind, what is the likely context for that engagement?
With data from the Office of National Statistics showing that the economy had fallen into recession at the end of last year (albeit a shallow one), persistent cost-of-living pressures, and a General Election on the horizon, what approach can we expect from Jeremy Hunt?
Conservative MPs have been vocally calling for tax cuts, and with the added context of a General Election fast approaching, a headline grabbing approach such as this must be tempting for Jeremy Hunt. However, the Chancellor will have to consider whether he has enough fiscal headroom to do so – with ever-changing expectation management about what might be possible.
The Autumn Statement in November saw a 2p cut to National Insurance. Welcome for many hard-pressed families, but with frozen income tax thresholds, hardly a massive boon to household budgets.
There is speculation on whether a further national insurance cut could be introduced in the Budget. Whilst being a cheaper alternative compared to cutting income tax, the Chancellor (and Prime Minister) will be conscious that the public will need to feel the benefits of the cut, and national insurance may not be the best route to achieve this.
For businesses, there’s speculation that adjustments to VAT, including a change to the VAT registration threshold to support small businesses, are likely to be amongst the Chancellor’s options.
At last year’s Autumn Statement, the Chancellor announced that he would make full expensing on capital investment permanent, as well as changes to the UK’s R&D tax regime. The Budget may see Hunt go even further on full expensing, and expand measures to cover leased assets, or exclude full expensing from restrictions on how businesses can use tax loss. A follow-up announcement giving additional details of the locations of the twelve forthcoming investment zones may also feed into support for business investment included within this Budget.
The last two years has seen a significant push from Labour to position itself as the party of business. Just today, reports have emerged that Labour is currently coordinating a series of supportive letters to editors from senior business leaders, to be released during the election campaign.
Alongside winning over the wider electorate, the Chancellor will be conscious that this Budget has to remind the business community that another Conservative government would be in their interests. Indeed, beyond the Budget, this focus on business will be a significant priority for the Conservatives, presenting an immediate opportunity for engagement for industries looking for greater support from the Government.
The Chancellor has very limited room for manoeuvre, and with an election on the horizon, he will do all that he can to make sure that people feel the positive benefits of any changes to taxes or spending ahead of the country going to the polls.
This provides an opportunity for those looking to influence the direction of policy in the coming months.
In the immediate aftermath of the Budget, the Government will be looking for actionable policies that will have a demonstrable impact in the short term – or manifesto ideas that could be implemented after the election.
Similarly, the Labour Party stand ready to pounce on perceived weakness, and are finalising the policies they want to take to the country in the months ahead. Engagement with Labour is therefore crucial to businesses. The opposition will be watching closely – ready to scrutinise the Government’s proposals, and present their own alternative.
If you’d like to have an informal chat about what the Budget means for your business, or about building a public affairs programme in the run-up to a general election, please get in touch with the team on [email protected].
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