After months of speculation, the Chancellor announced his Spring Budget earlier this month. This Budget is potentially the final opportunity for the government to lay out tax and spending plans before the next general election, and therefore it was widely speculated that the Chancellor would leverage the timing by announcing voter-pleasing tax cuts and reforms.

Has the Chancellor succeeded in balancing tax and spending cuts, whilst still delivering the “feel good” factor for voters?

“This is not a budget for long term growth”

Professor Joe Nellis, MHA’s Economic Advisor and Professor of Global Economy, Cranfield School of Management, commented: “The Chancellor stressed throughout his Budget speech that his priority is creating the basis for long term growth of the UK economy, but economists will struggle to spot the measures that will make this happen. ‘Investment is the Engine of Growth’ but the Chancellor could have been much more ambitious by announcing, for example, a cut in corporation tax or at least promises of cuts to come in order to boost confidence in the business world.  

The OBR has predicted that the UK economy will grow in 2024 by 0.8%. This is optimistic and it remains to be seen whether or not the current recessionary environment can be reversed quickly, and if not, the economy will at best flatline this year.  

John Maynard Keynes was famous for his dictum “spend, spend, spend” your way out of recession. The Chancellor did not have the headroom to follow the advice of Keynes. The next few years will be tough for the UK economy. Nevertheless, those in work will benefit from the cut in National Insurance, which combined with the NI cut announced in the autumn, will mean that the average worker on £35k per year will be about £80 per month better off.  

The Chancellor was content to announce a large number of small measures but collectively these are unlikely to shake the economy out of its lethargic state. 

Despite the length of the Chancellor’s speech, there were no rabbits pulled out of hats. In general, this was not an ambitious budget, with the sole aim of political point scoring. This is the start of an election campaign.  

The Chancellor has taken a shotgun approach and failed to hit any obvious targets. This was a budget designed to win votes and grab headlines, not create meaningful change. This was a missed opportunity, especially as there was nothing to help business or to inspire confidence from external investors.” 

 No rabbits, no hat for the construction industry 

Brendan Sharkey, real estate and construction specialist at MHA, said: “Maybe there was too much logic to think that the Chancellor would address the housing market in the Budget announcement.   

Housing, along with Education and Health are primary needs. Unfortunately, unlike the latter two Housing provision is not under the control of government and it needs a stimulus. The development of more affordable and energy efficient housing should be a point of policy, particularly given the status, which is clearly recognised by Michael Gove. 

Reforms to SDLT by increasing the nil rate band to help first time buyers, making the duty payable by the seller and not the buyer, incentivising downsizers would have increased the volume of transactions but not diluted the Exchequers tax take. The withdrawal of SDLT relief for multi-dwelling purchases may reduce tax avoidance but will not change the housing provision. 

The reduction in CGT following the sale of residential properties from 28% to 24% recognises that this will increase the volume of transactions. So why not 20% which is the standard rate? 

 What is so wrong in giving tax relief for energy efficient improvements to the landlords rather than criticise for poor quality housing?” 

 VAT registration thresholds 

Alison Horner, partner at MHA, commented: “The increase of the VAT registration threshold is not a headline grabber and not much more than an inflationary rise. Whilst we would have hoped for something higher to take even more businesses out of VAT, it is encouraging to see the limit being raised and hope to see the threshold go higher in years to come.

What more is needed to persuade the Chancellor to abolish the Tourist tax and bring back the Retail Export Scheme. It was a great surprise that this did not happen with the extensive lobbying by high end retailers and convincing financial evidence that it generates up to £11bn for UK Plc. UK shoppers will be more interested in tax cuts than supporting wealthy tourists but it is an unpopular move in the luxury goods retail sector which will be looking for a boost in these inflation stricken times.” 

Great British ISA – the devil’s in the detail 

Dominic Thackray, Financial Advisor at MHA Caves Wealth, wrote: “The Great British ISA – If this is in-line with changes Hunt is looking to make for pensions under the Mansion House Compact and requires investments into unlisted companies, would existing Venture Capital Trusts not be better placed? VCTs already offer tax free returns, and offer a 30% income tax relief on amounts invested, up to a £200,000 a year allowance. As ever, the devil is in the detail until the consultation is complete as to how a ‘UK investment’ is defined, given commercial activities that larger listed companies partake will also be outside of the UK. 

 

Fuel Duty 

Andrew Thurston, tax director at MHA, commented: “The Chancellor announced that the temporary 5p reduction on Fuel Duty would be extended until March 2025.  T

This continues the reduced Fuel Duty at 52.95p per litre.  It was also announced that the current fuel duty rates would be frozen for a further 12 months. 

  These announcements are welcome news as the price of fuel appears to have stagnated around the £1.50 per litre.  With the increasing uncertainty in the Middle East, the cost of fuel could easily rise again so the 5p reduction remains a topical relief although it is difficult to see if the consumers have actually benefitted from the 5p reduction with the prices continually fluctuating.  The hope is that this will help with the impact of UK transport costs within the supply chain, further reducing the cost of goods to the consumer.”

Focus on tech 

Jason Mitchell, partner at MHA, said: “The Budget unveils a clear focus on nurturing and bolstering the tech sector, marking a significant stride towards positioning the UK as a global tech hub akin to Silicon Valley. Jeremy Hunt’s speech emphasised tech’s pivotal role in driving innovation and economic growth. 

One aspect of the Budget was the Chancellor’s recognition of the transformative potential of technology in public services. Hunt outlined plans to leverage AI and IT to streamline administrative processes in the NHS, as well as deploying tech solutions such as drones to enhance police operations and crime reporting. These initiatives not only demonstrate a commitment to improving efficiency but also highlight the government’s recognition of the integral role tech plays in modernising essential services. 

 The Budget also includes a £360 million package aimed at supporting innovative research and development in key sectors such as life sciences, automotive, and aerospace. This injection of funding signifies a strategic move towards digitisation and underscores the government’s recognition of the importance of technological advancement in driving economic growth and competitiveness.” 

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