Hunt aims to restore Tory fortunes with £10bn tax cut

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Good evening.

Upbeat rhetoric on the UK’s economic recovery and a $10bn personal tax cut took centre stage in Jeremy Hunt’s spring Budget this afternoon as the chancellor drew the battle lines for the forthcoming general election.

In a speech short on surprises, Hunt announced a range of tax-raising measures, including the abolition of “non-dom” status and an extended windfall levy on oil and gas companies, to pay for the well-trailed reduction of 2p in national insurance, a move that will benefit 27mn workers, replicating the move made in his Autumn statement.

Other announcements included a tinkering in thresholds affecting the taper of child benefit, a new British Isa to encourage investment in UK equities and new taxes on tobacco, vapes and business-class flights. Hunt also announced a “landmark public sector productivity plan”, including funding to update NHS IT systems.  

Apart from some help for children’s social care placements, there was little solace for cash-strapped local councils, although Hunt did announce some new devolution deals. There was also help for the creative industries, including a tax credit for low-budget independent films.

The chancellor was bolstered by slightly better than expected economic forecasts from the Office for Budget Responsibility, which said the UK would expand 0.8 per cent this year, up from its previous forecast of 0.7 per cent, and that growth for next year would hit 1.9 per cent rather than its previous estimate of 1.4 per cent. 

This was balanced by confirmation that the country’s tax burden would continue to climb, rising gradually to 37.1 per cent of GDP in 2028-29, the highest level since 1948. Government borrowing would also be higher than expected, although the detail caused little more than a flutter in bond markets.

The big question for the government is whether today’s measures will move the dial politically ahead of the general election, with recent opinion polls showing the Tories trailing the opposition Labour party by some 20 points. “A payday loan of a budget designed to get a hand-to-mouth government from here to the election” was how the FT’s UK chief political commentator Robert Shrimsley characterised it.

Labour leader Sir Keir Starmer described the speech as a “last desperate act of a party that has failed” and while his party has criticised the Tories’ “scorched earth” approach to the public finances, Starmer said his party would support the cut in national insurance.

Hunt’s decision to stick with his existing post-election public spending plans of a 1 per cent rise in real terms, instead of cuts that had been floated, may be helpful to Starmer, but the chancellor’s appropriation of Labour’s signature policy of abolishing non-dom status poses fresh questions of how Labour would pay for its programme.

The move, reckons Inside Politics writer Stephen Bush, could turn out to be the most significant announcement of the day.

Need to know: UK and Europe economy

UK construction activity stabilised in February as demand improved on the back of falling inflation and the prospect of interest rate cuts, according to new PMI survey data. Although it was the sector’s best performance since August 2023, contractors are still feeling the effect of “a protracted downturn in activity”.

Ukraine is set to accept restrictions on its trade with the EU to defuse a political row with Poland, but in turn wants Brussels to ban Russian grain imports, the Ukrainian trade minister told the Financial Times.

French finance minister Bruno Le Maire said the country’s budget deficit for 2023 would be “significantly” above target and that further spending cuts would be needed.

Last week’s higher than expected inflation data for February, especially in services, means the European Central Bank is likely to resist calls for an imminent cut in interest rates. The ECB has also got a staff revolt on its hands over the bank’s “disrespectful” approach to climate change.

Need to know: global economy

China set an ambitious target for economic growth of 5 per cent this year as premier Li Qiang promised to tackle the property crisis, high local debt and troublesome deflation. Military spending is also set to grow.

The FT revealed that academics at Imperial College London had worked with scientists at Chinese institutions linked to Beijing’s armed forces and defence sector on research with potential military applications.

Venezuela announced its presidential poll for July 28 with strongman President Nicolás Maduro expected to seek re-election. It is unclear who he will run against since opposition candidate María Corina Machado — who overwhelmingly won an October primary — has been disqualified.

Haiti’s Prime Minister Ariel Henry pitched up in Puerto Rico after his whereabouts were unknown for days, leaving behind a country in chaos with violent gangs demanding his ousting.

Gold prices hit a new record high, driven by hopes of US rate cuts and “phenomenal” buying by Chinese investors. Bitcoin also briefly hit a new record price of $69,200 yesterday. The world’s largest cryptocurrency has surged since US regulators in January approved spot bitcoin exchange traded funds issued by Wall Street stalwarts.

Need to know: business

Long-awaited — albeit watered down — rules from the US securities regulator will for the first time require company disclosures on climate risks.

France’s Dassault Aviation warned that Europe’s defence industry would take decades to build up arms production, despite talk from Brussels about urgently rebooting the sector.

UBS chief Sergio Ermotti hit out at European politicians and regulators for deliberately suppressing the continent’s banks by stopping their growth and allowing US rivals to dominate.

The ding-dong between OpenAI and Elon Musk, one of its founders, continued as the company released emails that showed Musk had supported its plan to create a for-profit entity, contrary to allegations in his recent lawsuit against the AI start-up. Musk is also under fire from former Twitter executives over severance payments.

This week is the deadline for large online platforms to comply with new EU regulations on competition. As our Big Read elaborates, some say it is too little too late. In the US, lawmakers have introduced legislation that would ban app stores from distributing TikTok unless ByteDance, its Chinese owner, divests control.

The luxury industry is starting to moderate its price rises after sales slowed for much of 2023. Though its well-heeled customers are less sensitive to pricing, they are not immune, writes Adrienne Klasa. The beauty sector is doing remarkably well however, as illustrated by the success of French retailer Sephora.

Japan is set to become the undisputed home of games hardware again after Microsoft signalled it was easing off its 23-year competition with Sony and Nintendo.

The World of Work

Much of the business world has made its peace with remote working but in banking and financial services it’s still a battlefield. Several lenders have upset employees by demanding they return to the office more days a week. Workers complain of draconian measures, such as monitoring their attendance and threats of disciplinary action for non-compliance.

More than 25 years since big names on Wall Street started being hit by huge sex discrimination claims, its top brass are still overwhelmingly male, says US financial editor Brooke Masters.

A group of American unions ended its campaign for board seats at Starbucks after progress on collective bargaining agreements for the company’s workers.

Mastering the art of producing a CV can be a fretful task, especially for younger workers: can employers come up with a better way to hire? Listen to the new Working It podcast.

Some good news

While most species’ populations are declining, populations of elephants in southern Africa are booming thanks to conservation efforts.

Source: Economy - ft.com