Before the Spring Budget was announced this week, there was a lot of speculation surrounding what it might include. Back in November, Jeremy Hunt’s Autumn Statement announcement had a focus on aspects like national insurance, economic growth, minimum wage, full expensing, and inflation. So, did this new statement cover similar themes?
With the Office for National Statistics (ONS) recently revealing that the UK technically slipped into a recession at the back end of last year, many are keen to know how likely the economy is to recover and whether inflation will persist or ease off.
In this article, we assess how the Chancellor’s plans have progressed since the autumn, highlight some predictions that were made before the 2024 Spring Statement, and unpick some of the key points to emerge from it.
What is the Spring Statement?
The Spring Statement represents a key date in the UK’s financial year (which spans from April 1st to March 31st). It is an announcement made by the Chancellor of the Exchequer and represents a chance for the government to provide clarity around their fiscal plans for the year ahead.
This can include major policy changes as well as general plans individuals and businesses should be prepared for. Using detailed forecasts (and leaning on the Treasury for support) the Chancellor essentially provides a budget for the nation.
How is it different to the Autumn Budget?
The Spring Statement and Autumn Budget serve the same function but occur at different moments in the year. There are some subtle differences between the two, such as the following:
Timing
The Autumn Budget is typically delivered in October or November, while the Spring Statement is usually delivered in March.
Scope
The Autumn Budget is a comprehensive fiscal event that sets out the government's taxation, spending, and borrowing plans for the upcoming financial year (as well as any longer-term fiscal strategies). The Spring Statement, on the other hand, is usually a shorter, less detailed announcement that provides an update on the government's overall economic position.
Policy changes
The Autumn Budget is typically used to announce major alterations related to the likes of tax, benefits, and public spending programmes. The Spring Statement, however, is used to update the public on progress towards previously announced goals, and to provide a preview of any other new changes that may be around the corner.
Scrutiny
The Autumn Budget is subject to detailed debate and scrutiny in Parliament, with opposition parties and interest groups given the opportunity to challenge the government's proposals and put forward alternative ideas. The Spring Statement is not subject to the same level of parliamentary scrutiny and is a more low-key event.
When did the 2024 Spring Statement take place?
This year’s Spring Statement was announced on March 6th. As is tradition, the speech was read to parliament at around 12:30pm following the Prime Minister’s questions. This was just over three months after the Autumn Budget and was the fourth budget to be delivered by current Chancellor Jeremy Hunt.
The budget announcement always takes place in the House of Commons and is accompanied by a projection from the Office for Budget Responsibility (OBR). This forecast is designed to provide a more objective/unbiased view of the current outlook.
What is the Office for Budget Responsibility?
The OBR is an independent organisation formed by the government in 2010 to offer analysis into the country's public finances. Its principal duty is to provide economic and fiscal predictions that inform the government's budget choices. The OBR ensures the government is held accountable and that independent/impartial projections are prepared.
Their forecasts are based on the most recent economic data/trends and are used to influence the government’s spending and taxing decisions. The predictions include a variety of factors, including economic growth, inflation, governmental borrowing, and debt. The OBR forecast is a widely anticipated event on the calendar since it sheds light on the country's overall economic performance.
What was predicted for the 2024 Spring Statement?
In general, Spring Statements don’t contain significant adjustments. However, with a general election likely to take place at some point this year, this one perhaps represented an opportunity for Jeremy Hunt and the government to get on the right side of voters.
By looking at the November update and recent news stories, we could at least determine what some of the focus might be for this new statement. Here are some of the topics we expected to feature:
Economic growth
Back in the Autumn Budget, the OBR more than halved their growth forecast, stating that there would be 0.7% growth in 2024 and 1.4% growth in 2025. A lot of people are now intrigued to see how conservative or optimistic their forecast might be now, especially given our recent fall into recession.
Personal tax
There was a keen eye on the salary boundaries at which workers start paying income tax. This was expected to stay the same, meaning citizens would continue to pay more as and when their salary increases. The same type of freeze was expected for the amount people must earn before they start paying any tax at all. Although, the Chancellor was also expected to target National Insurance as a way to provide people with more spending money.
Public services efficiency
Hunt was expected to announce new plans to drive efficiency within the public services sector by finding ways to improve processes. The Chancellor is hoping to boost productivity in areas like the NHS and local police forces, while saving them thousands of hours and millions of pounds. Councils will likely have to submit detailed plans to demonstrate how they will embrace this initiative.
Tax increases
With money still tight, it was predicted the government would introduce new taxes for different areas as a way to raise funds for the country’s ongoing budget needs. It was speculated there would be a new ‘Non-dom’ tax rule to reduce the tax relief gained by those in the UK who claim non-dom status. On top of this, there may be an increased tax for people’s second ‘holiday’ homes. And there were also rumours of a new vaping levy which would apply to any vaping products.
What were the key updates from the 2024 Spring Statement?
So, following on from these predictions, what was actually announced? As expected, there was a big emphasis on putting money back into people’s pockets in an attempt to spark the economy into life. Here are some of the key updates to emerge on March 6th:
- The OBR forecasts 0.8% growth for the economy this year, and 1.9% growth for next year
- They also expect inflation to fall to below the government’s 2% target by the end of June, and further fall to 1.5% in 2025
- From April, the small business VAT threshold will rise from £85,000 to £90,000
- Small business loan scheme (which was introduced during Covid) extended until March 2026
- £570m assigned to devolved governments in Scotland, Wales, and Northern Ireland
- Tax rate for property sale profits cut from 28% to 24%
- £2.5b budget for NHS in 2025
- 5p cut to fuel duty on petrol/diesel kept for another year
- £120m added to government fund that prioritises green energy projects
- Alcohol duty freeze extended until February 2025
- From October 2026 a vaping product tax will be introduced
- Cost-of-living government fund extended by six months to support people with high costs
- Households where the highest earner makes £60,000 can now claim full child benefits (the upper limit was previously £50,000)
- National Insurance cut by 2%
- From April 2025 there will be a new ‘Non-dom’ tax rule for those who have their permanent home abroad
- New ‘British ISA’ to be introduced, allowing people to annually invest up to £5,000 more (tax free) in UK assets
- ‘Windfall tax’ on the profits made by energy firms extended until 2029
How will this affect businesses?
In terms of the overall position for the UK, interest rates remain high as we tackle inflation. But despite this economic turbulence, our growth appears to be higher than most other European economies. So, even though a lot of challenges remain, there is perhaps at least some cause for cautious optimism. To add to this, inflation has dropped from 11% to 4%, meaning we are on track to hit the 2% target that is due in a few months. This is almost a year quicker than initially predicted in the Autumn Budget.
Millions of workers will be paying less national insurance from April, with rates being cut again from 10% to 8%. If people have more disposable income this should theoretically inject more money back into the economy. The UK's underlying debt is on track to fall as a share of GDP and we continue to have the second lowest government debt within the G7.
With regards to how these initiatives will specifically impact individuals and businesses, we have seen the introduction of a range of financial measures that will take hold across various sectors. The forecasted economic growth over the next couple of years sets the stage for potential expansion opportunities for companies. This should also provide more funding for public services, higher salaries for employees, and additional training capabilities to build a highly skilled workforce.
With the small business VAT threshold rising, businesses operating in this bracket may experience a slight relief in their tax obligations, allowing for greater flexibility in their financial management (at a time when every penny counts). Moreover, the extension of the small business loan scheme offers continued support for companies who have been trying to navigate non-stop turbulence since the pandemic. This will enable them to have continued access to vital resources, so that they can invest as part of their growth, innovation, and recovery efforts.
The allocated pot for devolved governments in Scotland, Wales, and Northern Ireland hopefully signifies increased investment and economic development within these regions. This should help to foster a favourable environment for business expansion and job creation. The extension of the windfall tax, in conjunction with the extra funds assigned to green energy projects, appears to reveal a concerted effort towards a fairer and more sustainable energy sector too.
It is clear UK businesses will need to continue striving for optimal efficiency and utilise smart data-based decisions if they are to achieve the necessary financial/operational resilience. However, perhaps some of the aforementioned initiatives will provide them with breathing room in the meantime.
What next?
If you want to see the evolution of these announcements (and the extent of progress that has been made), be sure to check out our analysis of the 2023 Autumn Budget. And for an even more detailed view of Wednesday’s statement, take a look at the government’s official Spring Budget 2024 overview.
