Hunt’s opening remarks
Jeremy Hunt says the UK economy has dealt with the financial crisis, the pandemic and energy crisis caused by war in Europe. He acknowledges that interest rates “remain high as we bring down inflation”, but adds: “We can now help families not just with cost of living support but with permanent cuts in taxation.” He calls it a “budget for long term growth”.
Peter Walker, deputy political editor: Anyone who had forgotten this is an election year will have been reminded after Hunt launched into an overtly political opening section, which criticised Labour’s supposed spending plans before he set out even one of his own.
National insurance
Hunt confirms that the national insurance contribution rate will be cut from 10% to 8% of pay from April.
This comes on top of a 2p cut in the autumn statement in November, which reduced the rate from 12% to 10%.
It is estimated that the 2p cut to national insurance would be worth about £450 a year for someone on a £35,000 full-time salary.
PW: This is the worst-kept fiscal secret in Westminster, as briefed and reported more or less everywhere. It will be popular with Tory MPs – but the same ruse was tried in the autumn statement, and did not shift the polls at all. Hunt says the “long-term ambition” is to cut it further when possible.
Growth
Hunt says the economy is expected to grow by 0.8% this year and 1.9% in 2025. That is slightly stronger than the 0.7% and 1.4% growth rate expected by the Office for Budget Responsibility at the time of the autumn statement in November.
Growth is then forecast to be 2% in 2026 before dipping to 1.8% and 1.7% in 2027 and 2028.
PW: For all that successive fiscal statements have been billed as a “budget for growth”, even these forecasts are fairly anaemic, and unlikely to instil new hope in Tory MPs facing electoral defeat. This is the big, and perhaps insurmountable, challenge the government faces.
Inflation
Inflation is expected to fall below the government’s 2% target in “just a few months’ time”, Hunt says, down from 4% in January. “Nearly a whole year earlier than forecast in the autumn statement,” he adds.
The Bank of England’s long-term target is to keep inflation at a “low and stable” 2%.
The figure is down sharply from a peak of 11.1% in October 2022, as food and energy prices have eased.
PW: Inflation is something of a rare political safe zone for Hunt and Sunak, given it looks like the only one of the PM’s five pledges to be met. Falling inflation is also something that you don’t need a focus group to realise it will be welcomed by voters, whoever gets the credit.
Government borrowing
Hunt says underlying debt, which excludes Bank of England debt, will be 91.7% of GDP in 2024-25 according to the OBR, then 92.8%, 93.2%, 93.2% before falling to 92.9% in 2028-29. “We continue to have the second lowest level of government debt in the G7, lower than Japan, France or the US,” he adds.
Hunt says borrowing falls from 4.2% of GDP in 2023-24, to 3.1%, 2.7%, 2.3%, 1.6% and 1.2% in 2028-29. “By the end of the forecast, borrowing is at its lowest level of GDP since 2001,” he adds.
PW: Election looming, anyone? Hunt’s section on borrowing and debt is launched with an attack not just on Labour but also the Liberal Democrats. It is not a coincidence that Hunt faces a very strong Lib Dem challenge to keep his Surrey constituency.
Public services
The chancellor has kept a 1% increase in day-to-day public spending above inflation, despite speculation it would be cut to just 0.75%.
Military spending will rise to 2.5% of GDP “as soon as economic conditions allow”, Hunt says. It is now at 2% of GDP.
PW: In talking about public services, Hunt faces the problem experienced by Rishi Sunak at every prime minister’s questions – he has to argue they are performing well, when more or less every voter in the UK disagrees. Arguing that the solution is not about money but “a more productive state” might cheer some Tory MPs and thinktanks, but is always easier to say than deliver.
NHS
Hunt announces a “landmark public sector productivity plan” will be published today, including cutting form filling by doctors using AI, digitising hospital processes and improving the NHS app. He adds: “We need a more productive state, not a bigger state.”
“I want this groundbreaking agreement with the NHS to be a model for all our public services” including education, the police, courts and public government, Hunt says. In the next spending review, the Treasury will prioritise applications for money from departments that show potential savings for the public purse in the long term.
PW: The idea of a “paperless” NHS is also by no means new, although it seems Hunt is pledging some extra money to make it more efficient.
Child benefit
Hunt announces a consultation on child benefit rules, to apply it to collective household incomes rather than for individuals from April 2026. He says the threshold will be for a high income tax charge on the benefit will be raised from £50,000 to £60,000. The top of a taper to withdraw the benefit will be raised to £80,000 from £60,000 at the moment.
The household support fund, introduced by the government in 2021 to help
families struggling with the cost of living, has been extended by six
months.
PW: This is another tweak that will help higher earners, but Hunt will know from fellow Tory MPs – and probably from some constituents – that the thresholds for child benefit, which used to be universal, can cause some angst, as well as confusion.
Childcare
Hunt says rates paid to nurseries to fund free childcare hours for parents of children aged more than nine months will continue for the next two years. The payments have become worth less to nurseries in recent years as inflation has risen sharply, cutting into childcare providers’ budgets. Hunt says the move will allow an extra 60,000 parents enter the workforce in the next four years.
PW: The seemingly serious wobbles faced by the government’s 30-hour free childcare offer for younger children has unsettled quite a few Tory MPs, who fear it will cause chaos if it doesn’t work. Hunt promises more support – but is vague as to what, and how much.
Non-dom tax status
The chancellor confirms non-dom tax status will be “abolished” and replaced by a “modern, simpler and fairer” system from April 2025. The status is enjoyed by people who live in the UK but who have certain overseas links – often determined by whether their father was born abroad. The status means they pay UK tax on money earned here, but not on their worldwide income. After four years, those coming to the UK will pay the same tax as other UK residents.
PW: This was billed in advance, but is still politically extraordinary. Downing Street has either defended non-domiciled tax status – as enjoyed by Sunak’s wife – or tried to not talk about it. Now it is being abolished, if replaced with a new system that still gives some benefits. The key aim here is to spike Labour’s guns – this was one of Keir Starmer and Rachel Reeves’s few outlined fiscal plans. Did I mention an election was coming?
Property tax
Hunt says the government will reduce the higher rate of property capital gains tax from 28% to 24%.
He also announces the abolition of stamp duty relief for those buying more than one dwelling.
PW: For all Hunt’s insistence this will bring in more overall revenue, reducing a tax aimed at higher-rate earners can be very easily painted by Labour as a break for richer people – and richer second-home owners.
Holiday lets
Hunt confirms plans to scrap the furnished holiday lets regime. The initiative gives tax reliefs on properties being rented out to holidaymakers and make renting out to holidaymakers more profitable than to long-term tenants. The move is expected to raise £300m a year for the Treasury.
PW: Another relatively minor tax change which taps into what appears to be genuine public sentiment – in this case, worries about how the rapid growth of the Airbnb economy risks hollowing out some holiday-dominated communities.
Vaping tax
Hunt confirms widely expected plans for a “vaping products levy” to be paid on imports by manufacturers, specifically on the liquid in vapes. It will be introduced in October 2026.
The move is an attempt to discourage children from buying the products. It is expected to raise £500m by 2028/29. A one-off increase in tobacco duty is also announced.
Alcohol and fuel duty
Alcohol duty was due to rise by 3% from August but Hunt said it will be frozen until February 2025, benefiting 38,000 pubs across the UK. The government is “backing the great British pub”, Hunt says.
Hunt said he would freeze fuel duty at its current level for another year, as expected. The levy should rise in line with inflation but this has not happened since 2011.
A 5p cut to fuel duty, which was introduced in 2022 and is due to run out this month, has been extended.
PW: An increasingly common aspect of recent budgets has been chancellors extending supposedly “temporary” freezes, allowing them to repeat the same good news at every budget or statement. Hence alcohol and fuel duties are not changed. The latter is announced with slightly half-hearted “plan for drivers” rhetoric by the chancellor, plus the now-mandatory shout-out for the Sun.
Savings
Hunt announces a new “British Isa”, giving investors a £5,000 extra tax-free allowance to “encourage more people to invest in UK assets”.
Hunt says a new British Savings Bond will launched in April, delivered by the state-owned National Savings and Investments. It will offer a guaranteed rate, fixed for three years.
PW: One of the many elements of this budget briefed in advance, this will be welcomed, but thus far is another fairly minor tweak, politically speaking.
Windfall tax and energy
Hunt extends the windfall tax on the profits of North Sea oil and gas companies by a year, raising an expected £1.5bn. It was introduced in May 2022 after Russia’s full-scale invasion of Ukraine sent gas prices soaring, feeding through to producers’ profits. It was due to end in March 2028, but will now conclude in 2029.
The chancellor confirms the government will spend £160m on two nuclear sites. The first, on the island of Anglesey or Ynys Môn, is the Wylfa facility in north Wales. It is owned by Japan’s Hitachi. The government hopes to find a partner to develop a nuclear power station there. The Oldbury site in South Gloucestershire is also part of the agreement.
He allocates £120m for green industries to develop technologies including offshore windfarms and carbon capture and storage projects.
PW: What Hunt describes as “clean energy” is focused on nuclear, which some might quibble with. But with the Conservatives badly split on where – or if – to build onshore wind and solar farms, nuclear is about as safe as it gets, politically.
The arts
The government will spend £26.4m on the National Theatre to upgrade its stages.
Independent films with a budget of less than £15m will receive a new tax credit.
The Treasury will also provide eligible film studios in England with 40% relief on their gross business rates until 2034.
PW: Such announcements are, in fiscal terms, small change down the back of the sofa, but do resonate. Plus, as Hunt noted, the creative industries are disproportionately important to the UK economy. This section also allowed the chancellor to make a lightly limp joke about Rachel Reeves, the shadow chancellor, “who seems to fancy her thespian skills when it comes to acting like a Tory”.
Other measures
The household support fund, introduced by the government in 2021 to help
families struggling with the cost of living, has been extended by six
months.Hunt says he plans to allow full expensing to apply to leased assets. Full expensing allows businesses to offset investment in items such as new factory machinery and IT equipment against tax.
He adds that the VAT registration threshold will be increased from £85,000 to £90,000 from the start of April, saying it would help “tens of thousands of businesses”.
He confirms that the government plans to sell a chunk of shares in NatWest bank in the summer. The bank was bailed out during the financial crisis to the tune of £45.5bn to help save the UK’s financial system from collapse. The state’s remaining one-third share in the bank is now worth about £7bn. “I want to create opportunities for a new generation of retail investors to engage with public markets,” Hunt says.
Hunt announces that AstraZeneca – the pharmaceutical company behind the Covid vaccine developed by Oxford University – plans to invest £650m in the UK to expand its footprint on the Cambridge Biomedical Campus and fund the building of a vaccine manufacturing hub in Speke in Liverpool.
The chancellor makes a one-off adjustment air passenger duty (APD) on non-economy flights. APD on premium economy and business class flights will be hiked by more than 10% next year. It will add £66 in tax to a London-New York flight in business class, up to £647, from April 2025. APD on a premium economy seat will rise £22 to £216 on a transatlantic flight, or from £26 to £28 on a short-haul flight.
PW: It is notable that Hunt announces both a tax break for smaller businesses, and efforts to address what he calls “historic underinvestment” – a concession that many voters believe the UK’s infrastructure is somewhat crumbling. There is even a slightly retro shout-out for “levelling up”.
