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6 March 2024

The Budget showed Labour is setting the political rhythm

Jeremy Hunt stole the opposition’s main tax rises and avoided cutting overall public spending.

By Freddie Hayward

Jeremy Hunt had one political job today: to put the Conservative Party in a position to win the general election. The Tories are running out of set-piece events that could win back the voters abandoning them. This Budget was not the answer. Fundamentally, people’s living standards will be lower at the end of this parliament than at the start of it (as the Office for Budget Responsibility’s report, published alongside the Budget, confirms). Whatever Hunt announced must be seen through this lens.

To a rowdy reception in the Commons, Hunt offered a story about an entrepreneurial country that would foster growth through private investment and lower taxes. But it is clear that he is peering over Rachel Reeves’s shoulder at her policies. Hunt stole Labour’s plans to abolish tax exemptions for non-doms and to extend the windfall tax on oil and gas companies.

Hunt used this extra money to cut the main rate of National Insurance (NI) by two percentage points (from 10 per cent to 8 per cent). He will presumably be hoping for a different outcome than after the Autumn Statement, when the same policy failed to increase Tory poll ratings. Voters now prioritise higher spending on public services and Hunt’s plans require severe cuts to unprotected government departments (though overall spending, contrary to speculation, will still rise by 1 per cent in real terms).

To lessen their impact, Hunt wants to invest in public sector productivity. The emphasis on productivity was a recognition that investment can save money in the long term. Spending cuts are pencilled in for post-election years, but not paraded around as the government’s central aim (unlike during the George Osborne era). Again, this demonstrated how Hunt has moved towards Labour. “Invest to save” is a recurring Labour slogan, and using technology to improve public sector productivity is key to the party’s NHS plan. The opposition, in other words, is setting the political rhythm.

Hunt ended his speech with a few suggestive lines. He said it was irrational to have two separate taxes on income, which seemed to suggest that the Tories aim to scrap NI entirely. This could lead to a fundamental debate on simplifying the tax system. It may also force Labour to defend its position that growth will come from greater investment.

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A classic ideological divide between the two parties is emerging: Labour would prioritise public services, the Tories would prioritise tax cuts. Today’s underwhelming Budget was a sign that this split could be central to the election campaign to come.

[See also: How will Labour respond to the Budget?]

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