Spring Budget garners mixed reaction
By Abigail Townsend
Date: Wednesday 06 Mar 2024
(Sharecast News) - The chancellor's spring Budget received a mixed reaction on Wednesday, as business groups and economists digested the government's latest plans to bolster the UK's faltering economy.
Recent data from the Office for National Statistics showed the UK had slipped into a technical recession.
However, in his last spring Budget before the next general election, Jeremy Hunt insisted that because the UK had "turned the corner on inflation, we will soon turn the corner on growth".
He also pledged to overhaul the tax regime for non-domiciled residents and trimmed a further 2p from National Insurance, telling the House of Commons: "We today put this country back on the path to lower taxes."
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: "The chancellor announced net tax cuts of £12.bn in 2024-25, falling to £5.2bn in 2028-29, with few surprises in the details.
"The underlying OBR fiscal forecasts barely changed at the crucial five-year forecast horizon, meaning Hunt used up some of his small remaining headroom to pay for tax cuts and covered the rest with a range of tax changes, such as the non-dom rules.
"Based on the Monetary Policy Committee's interpretation of the autumn statement tax cuts, we think they will judge today's measures will add around 0.1% to GDP growth over the next year but have little effect on the two-year ahead inflation forecast.
"All told, we think that today's measures do not change the economic outlook or the MPC's thinking very much.
"We still expect the first Bank Rate cut in June."
Laura Suter, director of personal finance at AJ Bell, said: "The chancellor will be crowing about tax cuts for those who need it most, but the cut to NI can't be taken in isolation. The current government presided over a system where income tax bands have been frozen at the same time as we've seen supercharged inflation pushing up both prices and wages."
Make UK, the manufacturers' trade body, said Hunt's plans to extend so-called full expensing to leased assets would benefit smaller companies in particular.
Stephen Phipson, chief executive, said: "Industry will welcome this statement, which builds on a number of other key announcements in recent months. The chancellor clearly sees manufacturing as a key sector in the economy of the future and is slowly but surely putting in place the building blocks of an industrial strategy."
However, Unite, the union, said: "Once again the budget offers nothing but the same failed choices and phony fiscal rules. The real issues is the crisis of under-investment in our industries and public services."
The British Retail Consortium appeared similarly disappointed. Helen Dickinson, chief executive, said: "When shops we love shut down, when jobs we need are absent, and when investment we benefit from is lost, it's our lives and our communities which lose out.
"It seems the chancellor does not share in our ambition and today's Budget will do nothing to deliver a better future for retailers and their customers.
"The chancellor has done little to promote growth and investment, instead hindering it with the business rates rise in April."
Rain Newton-Smith, chief executive of the Confederation of British Industry, said: "Businesses recognise that the chancellor had to perform a tricky high-wire balancing act, of giving momentum to the economy without sacrificing hard-earned progress on bringing down inflation.
"Doing that successfully meant focusing on the horizon ahead, and the chancellor is right keep his gaze fixed on the structural challenges facing the UK economy."
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