Great budgets change history. The bit of history I want to change is to show people … it’s possible to have healthy growth.
In a social media clip ahead of the spring budget today, Jeremy Hunt made this appeal to posterity and his chroniclers. It was a grand statement of intent: the chancellor intended to present a budget of genuine significance this afternoon. Historians, he counselled, should take note.
So with Westminster now pouring over Hunt’s budget measures, what’s the verdict? After all, the chancellor’s announcement this afternoon will be lucky to feature as a footnote when the annals of this latest phase of Conservative governance are written.
As far as the Conservative Party’s political prospects are concerned, it’s a pity — for Hunt’s task today was genuinely of historic proportions. An Ipsos survey published on Monday put the Conservative Party on an all-time opinion poll low of just 20 per cent. Hunt’s history-making pretensions aside, what is a budget for a beleaguered administration such as this if not an opportunity to shift the dial?
Hunt cuts National Insurance in a budget that was exactly as trailed
Unfortunately for the chancellor, on this measure at least, it seems strikingly unlikely that his budget will succeed. While Hunt’s bombastic rhetoric undoubtedly had a pre-election feel, jokes at the expense of Angela Rayner or her boss’ waistline matter rather less than the policy substance. And there is no denying Hunt’s dilemma in this regard: his budget thunder was, in the end, denied to him by an official Treasury briefing operation.
Hours before the chancellor arrived at the despatch box, sans alcoholic beverage, The Times’ Steven Swinford lumbered Hunt’s headline proposals onto X/Twitter. Thus, when the chancellor eventually got round to announcing a 2p cut to the rate of National Insurance — at a cost of about £10 billion to the exchequer — any merriment was muted.
Hunt’s decision to cut NI as opposed to a more politically potent pitch on income tax is, of course, highly revealing as to the brutal reality that underpinned his statement today: the government is hemmed in by a rocky financial situation. In a grave development for a party looking for pre-election sweeteners, Hunt’s fiscal headroom was simply far less than he had anticipated at the start of the year. As a result, with the government’s fiscal restraints recast, expectations were rolled back and fiscal prudence re-emphasised.
In spite of it all, Hunt tried his utmost to embellish the narrative he has majored on as chancellor. This latest cut to National Insurance, he declared, points to a government intent on rewarding hard work. Indeed, for all of Rishi Sunak’s discomfort on fiscal policy since 2022, this budget presents another opportunity for the PM to highlight his tax-cutting credentials — which, he insists, amount to a formula for growth.
But there follows a problem for the prime minister: his pitch here is already in the process of being shredded by underwhelmed Conservative MPs. Take the response of the Trussite Growth Commission, a think tank set up by the former prime minister:
If you listened to the chancellor you might have thought that the budget was for more growth, less migration, more people working and lower taxes. But the OBR spills the beans — slower growth in GDP per capita, more migration, lower participation rates and higher, not lower, taxes.
Electorally, as well, it is roundly recognised that Hunt’s first NI cut at the autumn statement failed to improve the Conservative Party’s electoral prospects. Rather, while cause and effect should be read into opinion polls at a pundit’s peril, the Conservatives’ ratings have declined since November. Today, with every light on his political dashboard flashing red, Conservative MPs will characterise the ever-conventional Hunt as merely flicking a switch — the very same one he fumbled mere months ago.
‘Rabbits’ and ‘traps’ – Jeremy Hunt set to deliver his 2nd full budget to the Commons
This budget is the definition, Conservative nihilists might conclude moreover, of electoral insanity.
NI tax cut aside, the most politically potent part of Hunt’s budget statement today was his raid on Labour’s non-doms policy. The government’s decision to scrap the non-domiciled status is simply a fascinating move. For years, Labour has said it would spend the money generated from scrapping the non-dom status on schools and the NHS. Duly, ministers had rejected the plan as economically unviable. But not any more.
As a result, tricky questions now abound for Labour’s policy teams: do they rethink its spending pledges or find new revenue-raising measures? Ultimately, Hunt’s decision to steal Labour’s non-dom pledge, cynical though it is, is essentially guaranteed to tease out divisions in Starmer’s top rank. We can expect Reeves and her colleagues hoping to one day lead high-spending departments to diverge slightly in their responses.
But far beyond Hunt’s Labour-facing traps, the biggest question that now hangs over events is simply this: what happens now?
The spring budget today, par for the course as it was, appeared to foreshadow a future income tax cut. With National Insurance checked twice now, therefore, Hunt and Sunak need a pathway to a more politically effective footing.
In short, Sunak has two options: he could shift to income tax by making cutting it a key plank in the next Conservative election manifesto; or he could simply cut it as part of a fiscal event later to be held this year.
The issue with the former proposal is that it sets up Sunak to fail on his pledge, made during the 2022 Conservative leadership campaign, to reduce income tax in this parliament. Arguably, therefore, this points to an autumn statement to be held in November — a month in which falling inflation and interest rates should create more fiscal headroom.
In this way, if the spring budget fails to live up to Hunt’s “historic” expectations, the case for Sunak to signal a new departure on income tax at an autumn statement seems compelling. It would, of course, force the Labour Party to once more rethink its spending/revenue-raising plans — this time likely only weeks away from an election.
This begs a broader question: who should helm the government’s next fiscal event? Does Sunak stick with Hunt, who is reported to have pushed back against the PM’s plan to cut income tax this time around, or switch up his top team? Might a chancellor Claire Countinho prove more pliable?
Ultimately, as questions abound as to the direction of Sunak’s government, one thing seems certain after today’s statement: this was not a pre-election budget. It won’t be May.
Josh Self is Editor of Politics.co.uk, follow him on Twitter here.
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