The Budget – Do the sums add up for UK families?

Commentary | 07/03/24

Yesterday the Chancellor delivered the Spring Budget in Parliament. The purpose of the budget is to update Parliament on the state of the economy and to outline the Government’s proposals for changes to the tax system.

This was arguably the last big economic event we will see from this Conservative government. The Prime Minister has told us to expect an election by the end of this year, so it is unlikely we would see another statement before then.

It goes without saying that there was a lot riding on this budget. The Conservatives will be hoping that the measures announced start to move the dial on their current ratings in the polls. Labour still maintains a significant lead. This was about appealing to potential voters. There were numerous mentions of the Conservatives being the party of lower taxation, trying to drum the message home.

The big headline announcement was a further cut to national insurance. Someone earning £25,000 a year will save another £249 a year from the latest drop. This will be a welcome change for the average earners across the country, following the previous cut last November. But Sunak (when Chancellor) had previously pledged to take a penny off income tax by 2024, which hasn’t happened, so represents another broken promise.

A further welcome announcement was the plan to extend child benefit to more families by raising the income level at which people start being charged for receiving the benefit. The budget included very little mention of pensions so did appear like the Government was trying to appeal to the working-age section of society.

During the delivery, Jeremy Hunt said the economy was improving, having “turned a corner on inflation”. That said, there were still a range of pledges to help struggling families. These included the extension of the Household Support Fund for six months, and a longer repayment period for budgeting loans which can be used for essential items like furniture or white goods for those eligible.

These proposals will help those hit hardest by the cost-of-living crisis, but no further long-term support was announced. Though the Chancellor did state that he was removing the charge on Debt Relief Orders. A welcome step for those trying to repay debts that they are struggling with.

Fuel duty was frozen again, recognising the importance of not increasing the costs of keeping a vehicle running, a lifeline for many families in terms of getting to work, school and keeping businesses moving. Another welcome step was the announcement that vehicle leasing companies will benefit from full expensing with draft legislation expected soon for full expensing to apply to leased assets, representing a significant tax break. We also saw a commitment to green investment with a fund of £120m for green energy projects.

Overall, a mixed bag of announcements. The Chancellor was keen to appeal voters, and historically the last budget of a government promises the most in real term gains. He may also be thinking about his own political legacy. Whatever happens at the next election it is unlikely that Jeremy Hunt will remain in post.

Few could have predicted the economic challenges that we have seen in the last five years (Brexit, war, a pandemic to name a few) but many are still feeling that they are struggling financially. The budget has tried to appeal to as many individuals as possible, offering something for different circumstances at a time when there is limited room to manoeuvre.

The real question now is whether the electorate will give the Conservatives another opportunity to be in the driving seat on economic growth in the coming months. Both major parties will be trying to claim that they can be trusted to manage the economy and improve the financial lives of the UK as we head towards an election campaign.