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A deflating hot air balloon | AccountingWEB | Help for Hunt’s lead-balloon Budget
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Help for Hunt’s lead-balloon Budget

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Having delivered a ground-breaking Budget that nobody noticed, perhaps Jeremy Hunt should take a more user-friendly approach. Philip Fisher has some suggestions.

15th Mar 2024
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I recently received an email suggesting that the Chancellor of the Exchequer’s second Budget in four months “went down like a lead balloon”. While this might be a little harsh, even Jeremy Hunt’s closest friends would be hard pushed to claim that it was a soaring success.

The more one sees of the Chancellor at the dispatch box, the stronger the impression that he is a man who does not trust his own skills as either an economist or a politician, preferring to deal in soundbites and performative spoilers.

It can’t help that he must be aware of the presence of a better-qualified predecessor looking over his shoulder every time he arrives at the House of Commons.

One of the oddities of the current political climate is that, rather than concentrating his attentions on the economy which might be a saving grace, Mr Sunak is now in full culture wars mode, apparently oblivious to the fact that this is not cutting through with the electorate.

The realm of taxation

Enough of the political analysis. From our perspective, the most interesting area to consider in the run-up to the election is the realm of taxation.

As suggested in my analysis last week, the national insurance contributions (NIC) cut may have been ill-founded if the intention was to excite the populace and persuade them to give the Conservatives yet another five years in office.

In particular, having already seen that a 2% reduction passed them by, generating no more excitement than the enhancement to tax relief for some cultural angels, repeating a failed strategy was always likely to have a similar outcome.

This should have been obvious to those in power, given that on several occasions their predecessors had taken advantage of NIC as a stealth tax.

There are two measures that could achieve the dual goals of helping the country and saving the Tories from electoral wipeout, if it isn’t already too late for the latter.

On the assumption that there is to be a third Budget within a 12-month period – perish the thought – Mr Hunt should forget about a third unsuccessful NIC cut and perhaps even stop trying to sabotage what he seems to see as his successor by stealing another Labour policy – applying VAT to public school fees.

Reinstate personal allowances

Instead, the measure that is most likely to cut through with millions of prospective voters is obvious. That is to reinstate the personal allowances that have been frozen over the past few years and commit to increasing them in line with inflation through to the end of the next Parliament.

It may sound odd to those with short memories but in doing so Hunt would be following a precedent set by George Osborne in the early years of the Conservative (in coalition) reign from 2010. He had increased the personal allowance by close to 50% by 2014. By way of contrast, it will only have risen by around half that amount between then and 2026.

An inflation-related restoration now would have the instant consequence of taking millions of people out of tax completely. This sounds like quite a vote winner to me it could be at least partially funded by reducing the point at which the personal allowance is phased out for higher earners.

More practically, if more cash is needed this might be a good time to ditch the beloved but wholly artificial fiscal rule.

Whether Hunt also wants to increase the thresholds for higher rates is a moot point, since this will be quite costly and have had a less noticeable impact.

Out of hand

In concert with this innovative but potentially expensive strategy, the Chancellor might also wish to consider measures to restrict council tax increases that are getting out of hand.

Discovering that if you have the misfortune to live in the Midlands (Birmingham or Nottingham, so far) you could be facing 20% rises in council tax rates over the next two years – despite the fact that councils will be cutting services to the point where most people won’t notice that they are still operating – is hardly a big vote winner for the government.

Diverting funds from the local council in Kigali towards even more local councils much closer to home could be another vote winner.

Unless Mr Hunt fancies a future career in TV, camping in the jungle or making a fool of himself on the dancefloor, he needs to grasp the nettle and implement the kind of tax policies that will please millions.

Replies (6)

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By Rob Swan
17th Mar 2024 09:08

No amount of 'hot air' is ever going to keep that one aloft!
Sorry - just couldn't resist :(
I'll see myself out.

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By Rob Swan
17th Mar 2024 09:17

Seriously, It seems - to me at least - that the Tories have given up completely on winning a general election and are not the least concerned about 'consequences' for the public - just making the 'right thing' as difficult as possible for the next gov't. That's shameful.
Hunt does seem to have the ability to 'confidently' present utter BS as 'a good thing', and keep a straight face while doing so. I don't thinnk anyone is fooled. (Has anyone else noticed that, on occasions, in appearance, Hunt might reasonably be mistaken for a close relative of a certain Mr. Bean?)

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Replying to Rob Swan:
paddle steamer
By DJKL
18th Mar 2024 11:02

Scorched earth- if one's inbuilt economic thought process is to lower taxes (and that is the Conservative mantra) then cut them without worrying about the cost as the other lot will have to deal with the drop in HMG income that then arises and of course, if Labour/Coatition/Whatever have to increase taxes back upwards, to fill the hole, even better re Conservative campaigning in 2029/2030.

We are into poisoned chalice politics. Labour's Liam Byrne left the Conservatives the message on that bit of paper in 2010 saying there was no money left, this is just the same approach in reverse without the letter. (Which was a political own goal)

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By agknight
18th Mar 2024 12:16

An article entirely of opinions, be they right or wrong. What happened to accountant objectivity?

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By alanpoole
18th Mar 2024 15:34

The current government has little chance of staying in office. Rather then cutting taxes, they might get some votes by cutting the rate at which state debt is rising. We all know that repaying debt is really hard and usually requires hard choices. Let's get on with it as a nation!

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By Open all hours
19th Mar 2024 08:50

If NI is reduced from 10% to 8% that in my book is a 20% reduction or 2 percentage points.
If it was sold like that it may have got some lift?

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