Spring Budget 2024: What measures could Labour continue in government?
With the Budget rapidly approaching on March 6, speculation is mounting in Westminster as to what the Chancellor could announce.
Jeremy Hunt has been on the airwaves in a bid to tamp down anticipation of further tax cuts after the International Monetary Fund (IMF) said the UK should focus on its public finances.
But with an election expected this year, and a Labour Party hell-bent on wooing business to its cause, are there financial measures Sir Keir Starmer’s government could support?
Fiscal rules
For the uninitiated, fiscal rules are restrictions on government spending and taxation in a bid to control the impulse to splash the cash in the short term, and boost investor confidence.
The government’s current set are that: debt as a percentage of GDP, excluding the Bank of England, should be falling in five years time; public sector net borrowing should be less than three per cent of GDP in five years time; and welfare spending should be below a set level.
While Labour, which is endeavouring to convince voters it can be trusted with the public purse, has announced its own strictures which broadly echo the government’s aims: not to borrow to fund day-to-day spending and to reduce national debt as a share of the economy.
Fiscal rules heavily influence the contents of financial statements like the Budget. Labour have also pledged to strengthen the Office for Budget Responsibility (OBR) and say they will aim to hold one annual Budget per year, in a bid to increase stability for businesses.
Childcare
Childcare measures, which many firms see as a no-brainer for getting parents, particularly mothers, back into the workforce have been cause for intense dispute between the parties.
Early last year, Labour’s shadow education secretary Bridget Phillipson pledged to make reforming the childcare system her “first priority in government”. But she didn’t have to wait long before Jeremy Hunt swooped in, unveiling his own scheme at the 2023 spring Budget.
From April 2024, working parents of two-year-olds will be eligible for 15 weekly hours of free childcare, increasing to 30 hours a week for nine-months-old and up by September 2025.
However, the rollout has faced issues, including providers warning of a lack of places, and the government may opt to announce more funding – which Labour would be likely to back.
Corporation tax
Corporation tax rates are currently at 25 per cent for 2023-24, up from 19 per cent for 2022-23, for firms with profits above £250,000.
Labour shadow Chancellor Rachel Reeves recently confirmed, if elected, her party would cap rates at 25 per cent for the length of the next Parliament.
Reeves also suggested the party could consider cutting the rate to encourage “competitiveness” but that it would not be increased beyond the 25 per cent threshold.
Hunt would be unlikely to increase the rate beyond its current threshold, making this another area of policy similarity.
Full expensing
Speaking at Labour’s business conference, Reeves said: “We have heard loud and clear the demand for clarity and certainty from business.
“So, we will maintain full expensing and the annual investment allowance.”
It echoed Jeremy Hunt’s language when he confirmed he would make the policy “permanent” at November’s Autumn Statement, meaning we’re unlikely to see any change.
“That is the largest business tax cut in modern British history,” he said. “We have not just the lowest headline corporation tax rate in the G7 but its most generous capital allowances.”
City Review
Labour’s review of the Square Mile revealed it plans to shake up financial regulation in a bid to boost growth.
The party want to unlock pension capital to boost investment in Britain and allow watchdogs to scrap “redundant” red tape.
Sound familiar? It certainly bears a striking resemblance to the government’s own plans for the sector.
So similar in fact, former City minister Andrew Griffith compared the announcement to “dog food lasagne”, suggesting they were comparable at first glance but differed in their contents.