Access Alert: Spring Budget 2024 – Key Takeaways

On Wednesday 6 March, the Chancellor of the Exchequer, Jeremy Hunt, delivered the UK’s Budget to the House of Commons.

As anticipated with the pre-election budget announcements, all measures were focused on voters. Substantially trailing the opposition in the polls, there were no rabbits pulled out of the hat for the private sector this time.

Labour’s response gave little away about its own approach, as we could have expected from a leader who fears making promises he can’t keep ahead of the election.

Tech sector measures

• Digital transformation in the public sector: Announcement of the Public Sector Productivity Plan, which presents public sector procurement opportunities from GBP 4.2 billion of funding to accelerate public sector adoption of technologies.
• Innovative technologies: Digital Adoption Taskforce to investigate how best to support the adoption of digital technology by SMEs in order to boost their productivity will launch soon.
• Life sciences: GBP 520 million in new funding for Life Sciences manufacturing, with large-scale investment competitions commencing this summer.
• R&D: HMRC expert advisory panel to support the administration of the R&D tax reliefs, providing insights into the cutting-edge R&D occurring across key sectors such as tech and life sciences.
• Space: Up to GBP 100 million to launch the national component of the full GBP 160 million Connectivity in Low Earth Orbit (CLEO) programme, which will enable UK researchers and businesses to perform the research and development needed for the next generation of satellite constellations.

Unlocking investment

The Chancellor will trigger reforms to pension funds and regulation, alongside the introduction of a ‘British ISA’ allowance of GBP 5,000, with the aim of promoting investment in homegrown technology firms and rescuing poor prognoses about British market performance. Further headline announcements were made to smaller businesses through an increase in the VAT tax threshold, alongside increased levelling-up funding and devolution deals.

The Chancellor made repeated references to ‘pro-growth’ promises made in the Autumn Statement, emphasising the permanence of full expensing and substantial funding injections into AI and Quantum technologies. The proposed legislation to extend full expensing to leased assets should serve to incentivise business investment.

‘Tax cuts for the public’

‘Tax cuts for the public’ was the Chancellor’s big bet, with a 2p tax cut in National Insurance. While a cut to personal income tax did not materialise as part of the Budget announcements, the cut in National Insurance could save the average worker around GBP 450 a year. Despite this, independent analysis from the government Office for Budget Responsibility notes that tax will be at its highest level in 70 years.

Despite an improved economic outlook for 2024, decisions were overshadowed by a technical recession and still-low growth. The Office for Budget Responsibility confirms that the government has little fiscal headroom, casting a shadow over the Chancellor’s plans. Inflation, stubbornly double the government’s target of 2%, continues to be a thorn in their side.

Labour Party response

Opposition leader Keir Starmer characterised the Budget as emblematic of ‘14 years of failure’ and the nearly mandatory accusation of ‘giving with one hand and taking more with the other’.

Labour may privately revisit Keir Starmer’s accusation that the government is ‘salting the ground’ with pre-election spending. Having appropriated Labour’s flagship policy to scrap the ‘non-dom’ regime, Labour has less room to manoeuvre to find revenue-raisers should they win the election, which must be held no later than 28 January 2025.

As the Chancellor’s last dance before the election, many of the provisions introduced by the government were drowned out by the stark reality of a 70-year high tax burden.

If you would like to understand more about what the Spring Budget may mean for your business, and what opportunities you could unlock and how, please contact Jessica Birch at [email protected] or Michael Laughton at [email protected].