When Jeremy Hunt criticised Boris Johnson from the backbenches in the summer of 2022, he probably thought that his time in government was pretty much over. The Brexiteers in his party, including Johnson himself, were unconvinced by his assertions in 2019 — when he lost the leadership contest in the final round to Johnson. Likewise, almost nobody was convinced by his fantastical promises of wild tax cuts in a bid to win the leadership race last year. In fact, most people probably don’t even remember his candidacy at all.
It is impressive then, that Hunt has become the first chancellor since Rishi Sunak to deliver a ‘proper’ Budget as he stood outside Number 11 Downing Street with that illustrious red box full of sunshine, rainbows, and pieces of paper outlining changes to the Government’s fiscal policy.
An Optimistic Plan
This was an election Budget at its heart, despite it being over a year until the next election is due. Had there been a fanfare each time Hunt patted the Conservatives on the back, the trumpeters would have quickly run out of breath. But cutting through all the political posturing, there were some serious reforms that could put Britain on the right track — and some omissions that could prove costly.
The rising cost of living is a major issue in the UK today. Energy bills are still high, and inflation has settled at 8.8 per cent in the last 12 months to January 2023. This isn’t normal or right. Inflation — especially cost-push inflation, caused by rising energy bills — is a considerable hindrance to any economy. Businesses have to put up prices causing consumers’ disposable income to stretch less far; in turn, businesses get less revenue and struggle to afford pay rises for disgruntled workers. The doom spiral goes on.
The negative multiplier effect that inflation and a wider cost-of-living crisis have on an economy must be addressed as soon as possible. That’s why the Chancellor’s assertions that the Energy Price Guarantee will remain at £2,500 for the next three months (after which energy bills are expected to be lower), and that charges on prepayment meters will be brought in line with comparable direct debit charges are very welcome. An economy is unlikely to thrive in a time of cost-push inflation. More accurately, the lower classes will not thrive since any rise in the cost of living hits their pockets harder.
The cost of living, however, was merely an aside before the main focus of the Budget was discussed: Growth. As is the way with modern politics, this was framed in a catchy soundbite. Meet the four E’s: Enterprise, Employment, Education, Everywhere. The government must be hoping that the electorate doesn’t grade their overall performance with an E come election day.
Budget Points
Let’s start with Enterprise. In place of the expiring super-deduction introduced by Sunak during his time as chancellor, Hunt has announced that every single pound that businesses invest will be deducted immediately from their taxable profits for at least the next three years, with the intention of making it permanent. The Office for Budget Responsibility says that this should increase investment by around 3 per cent for every year it is in force, which will help create new jobs and more choices for consumers. Up to £20 billion is also going to be invested in carbon capture, utilisation and storage, helping to create jobs in the industries of the future. More importantly, however, this technology could enable us to better counter some of the effects of climate change.
Employment reform was another key component of the Budget. While no mention was made of the four-day working week, Hunt recognised the need to tackle economic inactivity and our low productivity. A plan to increase the availability of mental health resources is much-needed and long overdue. The disability benefits scheme will also be overhauled to give more people with disabilities the chance to work. Overall, this budget aims to relieve some of the burdens on taxpayers by helping more people remain or become economically active.
Education reform is perhaps the most significant part of this Budget. Having children may be a joy and a privilege, but economically it is a formidable responsibility. The cost of childcare can run into the thousands, leaving many parents with no choice but to do it themselves. This means being permanently out of the workforce for at least four years until their child starts school. Hunt has stated that he wants an increased supply of wraparound care in primary schools, with households where all adults were working at least sixteen hours a week to be given thirty hours of free childcare. This is arguably a landmark reform that should enable more parents — especially mothers — to stay in the workforce without taking career breaks and climb the employment ladder. One of the hurdles preventing a smooth path to economic growth has just been reduced to the height of an infant.
Levelling Up (the Everywhere component) was also on the agenda again, with £8.8 billion being allocated for local transport in England. The government may finally be coming around to the idea that sometimes services are better run by local people with local interests in mind. If we are to achieve net-zero targets and reduce climate change, improved public transport has to be a priority — especially in cities.
Missed Opportunities
Despite the positivity, there are glaring omissions. HS2 has once again been delayed. Yes, costs have increased but the infrastructure needed to make public transport more attractive and reduce some of that road traffic, while helping the planet, is surely worth the extra cost. The decision stinks of a lack of ambition and short-termism that puts the UK on the back foot in the long run.
However, the push towards nuclear power under the banner of environmental sustainability carries certain risks. Nuclear fission reactors still produce nuclear waste that will need to be disposed of somewhere. An increase in onshore wind farms could be a better route to energy security alongside investment in the nuclear sector. We should be mature enough to support clean energy, even if it doesn’t have the most pleasing effect on the eye. Most of the public, as shown by this YouGov survey, thankfully agree; though clearly, the government has chosen to side with the minority.
Given that Britain has just been through a winter of strikes, it is also surprising that no mention was made of either a one-off payment or an improved pay offer for the public sector. Wednesday saw teachers, junior doctors, civil servants and London Underground workers all striking for improved pay and working conditions, but the Chancellor was silent. This silence may reflect the government’s failure to negotiate a deal; something that would be forgivable if they hadn’t spent the past few months hoping that it was all a bad dream and that everyone would be happy again tomorrow — before finally panicking and realising that it wasn’t. Perhaps we’ll get a separate announcement orchestrated by the government’s PR machine to deflect from the next big issue that they stumble into. The Budget could have dissipated some of the uncertainty around the strikes; instead, its silence has only enhanced it.
So, to date, we have an economy that’s not technically going into recession this year though real GDP will still contract by 0.2 per cent. We have more Levelling Up, but short-termism blocking the completion of HS2. We have more investment in developing nuclear power, but a failure to invest in existing onshore wind. And we have a silent Treasury on the strikes that have disrupted the winter months and will continue to disrupt public life without a resolution. Despite some positive policies, this was a lukewarm Budget for a lukewarm economy. The government could and should have gone further.
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