6 March 2024

Spring Budget 2024: The Blueprint for the Conservative Party Manifesto

Sonia Khan, Director and former Treasury Adviser

While the Spring Budget of 2024 won’t be winning awards for brevity, it does give us a peek inside the Conservative Party’s manifesto as it approaches a General Election.

Chancellor Jeremy Hunt delivered a comprehensive hour-long speech, unveiling a slew of measures aimed at appeasing Conservative MPs, enticing voters with pre-local election treats, and thwarting any potential leadership challenges. Among the headline announcements was a 2p reduction in National Insurance Contributions, coupled with an array of tax reliefs for theatres and orchestras, alongside plans to deploy drones to police emergency scenes.

Hunt’s address strategically catered to various audiences, opening with measures tailored for working individuals, including assistance on debt relief and an extension of pandemic loan packages for Small and Medium-sized Enterprises (SMEs). The Chancellor also outlined additional regional devolution plans and proposed reforms to child benefit, signalling a shift toward a household-based tax system by April 2026, potentially reshaping the tax landscape significantly.

Reflecting the government’s focus on technological innovation, the Budget emphasised policies such as reversing angel investor rules, injecting funds into the prestigious Turing Institute, and a substantial £360 million Research and Development (R&D) package. While education received scant attention, a nod to skills was made through the introduction of a £7.4 million AI upskilling fund aimed at SMEs.

However, the pièce de résistance of the Budget was the much-anticipated cut in national insurance contributions, complemented by a pledge to freeze fuel and alcohol duties — a boost for motorists and pub-goers alike. Despite the familiar tone for seasoned Budget observers, including to me as a former Treasury special adviser, the emphasis lay in maintaining stability amidst political turbulence. The joint appearance of the Chancellor and Prime Minister in pre-budget preparation photos underscored a concerted effort to present a unified front, vital for navigating the precarious political landscape.

While the Budget addressed several pressing issues, questions linger around plans for housing reform and escalating demands for increased defence spending amid geopolitical tensions. This may be tactical, as it’s widely believed that the “real” Budget, with potentially more impactful measures, will be reserved for closer to the speculated election date, later in the year. So, while the Spring Budget may not have drastically shifted the political landscape, its significance lies in setting the stage for the political manoeuvring yet to come.

The Labour response: Time for change

Alice Perry, Director – UK Public Affairs and former NEC Chair

Keir Starmer’s budget response highlighted some of Labour’s General Election attack lines. Starmer talked about the 8 million people on NHS waiting lists, the UK’s rivers and seas being full of sewage, crumbling schools and the UK being on a path of managed decline. Starmer wants to paint Rishi Sunak and the Government as “out of touch” and “out of ideas” with working people paying the price for the Government’s economic failure. The question for voters is whether after 14 years they feel better off or that it’s time for change.  

Starmer also used his response to showcase the different policy priorities between the Opposition and Government. Starmer noted the absence of a plan for housing building, investment in critical infrastructure, industrial strategy and a plan to address climate change. Expect these to feature in election material.  

The 2024 Budget takes place against a backdrop of intense speculation about the date of the next General Election. The earlier timing and tax giveaways further added to the rumours. Keir Starmer ramped up the pressure on Rishi Sunak to call the election for 2 May. Labour remembers how Gordon Brown was undermined by being labelled a “bottler” for not calling an early election and want to paint the Conservatives as desperately trying to cling onto power if they draw the parliament out further.   

The Government’s decision to adopt two of Labour’s key tax reforms leaves a hole in Labour’s fiscal plans. Labour will need to find alternative sources of income to fund their manifesto commitments and run the risk of being accused of having “secret plans to raise taxes”. Their proposed windfall tax on gas and oil had been heavily criticised at Labour’s recent Scottish business conference. By adopting this policy, the Conservatives risk losing support in Aberdeenshire to the SNP, which may prove helpful to Labour in the long-term.  

Investment in UK plc takes centre stage

Simon Fitzpatrick, Director – UK Public Affairs

The theme of productive finance and harnessing greater capital from pensions and savings funds into UK growth assets once again featured prominently in the Chancellor’s statement. As was trailed in advance, DC pension schemes will be required to publicly disclose the breakdown of their asset allocations, including in UK equities, a move designed to hold their feet to the fire and ensure UK investments increase. The FCA will consult further on this in the near future, with the Government dangling the threat of further action if the data does not show an improvement. The Treasury is also working with the Association of British Insurers to develop a monitoring framework for the Mansion House Compact as it approaches its first year anniversary. It is clear that, although investment in UK assets is not being mandated at this stage, Government wants to maintain a watchful eye on progress.

Two new savings opportunities were also announced for the retail market. First, a new “UK ISA”, which in practical terms is an extension of existing ISA allowances by £5k for investment in UK-focused assets. Second, a new British Savings Bond which will be offered up by National Savings & Investments, offering savers a guaranteed rate of return for three years. Retail investors can also look forward to potentially taking a stake in NatWest as the Treasury has committed to offloading its remaining shares by 2025-26, with an offering to the retail market potentially as soon as this summer depending on market conditions.

Today’s Budget also takes forward the previously announced commitment to establishing a new market to allow private companies to trade their securities on an intermittent basis and in a controlled environment. The new Private Intermittent Securities and Capital Exchange System – PISCES – is intended to boost the UK’s pipeline of IPOs and build on work such as the Listings Review led by Lord Hill. The Government is consulting on this with the move already warmly welcomed by the London Stock Exchange Group.

One policy on which momentum seems to have stalled a little is the “lifetime provider” model for DC pensions. While the Chancellor announced that he remains “committed to exploring” the lifetime provider proposal, the Red Book suggests that this is a “long term” aspiration, and that further analysis is required to ensure it would improve outcomes for savers and align with existing reforms such as the Value for Money framework (which is itself being strengthened with new powers for the regulators). This sounds rather like a policy being kicked into the long grass and the Government may have had second thoughts after receiving a lukewarm response in the initial consultation.

Get in touch with a member of the team to discuss further.

And sign up to our monthly UK Public Affairs newsletter here for regular updates.