2024 Spring Budget: Is Jeremy Hunt Prioritizing the Economy or the Election?

March 5, 2024

In 2012, Chancellor George Osborne aimed to address VAT inconsistencies on hot food by imposing a 20 per cent levy on popular items like Britain’s cherished steak bakes. The ensuing backlash forced a U-turn so impactful that it still serves as a source of humour in intros more than a decade later. According to former Labour MP and ex-Shadow Chancellor Chris Leslie, this incident underscored the inherently political nature of budgets.

Leslie argues that budgets are predominantly political, with only a minor economic influence from bodies like the Office for Budget Responsibility (OBR). He notes Osborne’s initial focus on civil service adjustments to the tax code, perceived by the opposition as new taxes, prompting a strategic shift to avoid such pitfalls. Osborne himself, in a recent episode of the ‘Political Currency’ podcast with Ed Balls, hinted at the political intricacies of budgeting, recalling the significance of backbench MPs enthusiastically waving order papers.

In the context of the current budget, there is a suggestion that Chancellor Hunt’s primary objective is winning votes rather than meticulous accounting. As the Conservatives face low polling numbers in an election year, Tory MPs are eager for policies that could sway undecided voters. One potential move causing a stir is the proposal to abolish non-domiciled tax status, a measure expected to generate revenue but likely to spark opposition criticism.

The planned abolition of non-dom status, seen by some as a pragmatic move, is not without its detractors. Critics argue that it could signify a government bereft of original ideas, borrowing policies traditionally associated with the opposition. While politically advantageous, especially in neutralizing attacks, the economic impact is a matter of contention.

The decision to tax the wealthy more could be detrimental to economic success, with opponents advocating for policies that encourage wealth creation and entrepreneurship. In the face of a recent recession and pressing financial concerns, Chancellor Hunt must balance political and economic considerations in the upcoming fiscal statement. The outcome of this dual challenge will be revealed shortly.