Research Briefing | Mar 6, 2024

UK: Hunt goes all-in on another NICS trim

The UK Budget was a damp squib of small-scale measures that will do little to change the economic or political outlook, in our view. Chancellor Jeremy Hunt implemented a 2p cut in the rates of employees’ and self-employed national insurance contributions, along with another freeze in fuel duty. These measures will be partially offset by other tax raising measures. The net loosening of policy will provide only a modest boost to our growth forecasts for 2024 and 2025, while subsequent tax rises will drag on GDP further out.

What you will learn:

  • The NICs cut followed a similar 2p cut in November’s Autumn Statement. But the boost to household spending power from lower headline tax rates still only mitigates around half of the drag from the long-running freeze on income tax and NICs allowances and thresholds.
  • Though the Chancellor decided against adding to the post-election squeeze on spending, the existing assumptions already looked unfeasibly tight. Today’s decisions increase the challenges the next government will face, and we think there’s a strong case to overhaul the fiscal rules.
  • Today’s package reduces the chances of there being another fiscal event before the general election. The Chancellor opted to cut his margin for error against the fiscal rules – his cushion would have been lower still had the forecasts been based on more recent market pricing.
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