In what will almost certainly be the final major fiscal event of the current Parliament, the Chancellor found himself juggling the competing aims of delivering politically attractive pre-Election tax give aways, while also providing a credible case that current and forecast public spending levels are sustainable, and that the Government has a longer-term plan to get the UK economy growing again.

To try and balance these objectives, Hunt set himself the task of crafting a Budget that would be capable of building ‘a higher wage, higher skill economy’, that ensures ‘work always pays’. But given the constraints he faced, this was always going to be a tall order – especially when the reality is that an extra 500,000 people slipped into severely insecure work in 2023 alone.

So, was he able to succeed?

Prioritising tax cuts

As heavily briefed prior to the Budget Statement itself, the headline intervention was a further 2p cut in National Insurance to be introduced at the beginning of April this year, in addition to the previous 2p cut announced in the Autumn Statement and introduced at the beginning of 2024.

Treasury analysis suggests this will equate to a combined £900 a year saving to the average worker, and a £600 a year saving on average to those in self-employment. The Chancellor went further, indicating that these reductions in NICs would lead to 200,000 more people in work, and would fill one in five current vacancies in the labour market.

A closer inspection of the OBR analysis of the Budget casts some doubt on these claims. Almost all of the anticipated increases in ‘hours worked’ attributed to people already in work being more likely to choose to work longer hours.(page 69)

Alongside the NICS cut, another high-profile tax change was the extension of child benefit to those earning between £60,000 and £80,000 until 2026. The aim over the medium term is to correct an idiosyncrasy in the tax system by moving to a child benefit system based on household income, rather than individual income.

Ultimately, however, with limited headroom available for new tax and spending commitments, prioritising these tax changes now means the Chancellor had little scope to invest further in key public services that will be needed to support more people into work and drive economic growth in the future.

While they may prove popular within the Conservative Party and with some voters, the reality is that those on high and middle incomes will disproportionately benefit; they will do little to address the financial penalty of £3,276 per year experienced by the 6.8 million people in severely insecure jobs; and, the Resolution Foundation estimate that anyone earning up to £19,000 will still be worse off than if the personal allowance had been increased in line with inflation.

The need for investment in public services

The measures included in the Budget will also do little to address the UK’s long term sickness crisis. Since December 2019, on average nearly 500 people a day have become economically inactive due to ill – leaving the UK with near a record 2.8 million people out of the labour market as a result.

While committing to fund a new NHS productivity plan alongside wider public sector efficiencies is welcome, we will also need additional long-term investments in our healthcare infrastructure, education, skills provision, local government and employment support if we are to see more of those people return to work and support future economic growth.

Instead, spending on public services is forecast to increase by just 1% per year during the coming Parliament – itself a real terms cut, but one which will be even more significant for Departments outside of Health and Education which remain ringfenced. The Budget documents make clear that there will not be another Comprehensive Spending Review this side of an election, so it will fall to the next Government to ensure these plans are sustainable for the future.

Urgent need for a comprehensive childcare workforce plan

More welcome was the Chancellor’s re-commitment to his funding plan for childcare – which if successfully delivered could support more women into secure jobs over the next four years.

While the Chancellor sought to reassure childcare providers that the rate provided for the roll out of free hours will increase over the next two years to cover rising wages and training, providers have consistently warned what is on offer is not enough.

Instead, many nurseries have been left fearing inflation and rising wage will leave them having to make up the shortfall. The increased funding does not resolve the gaping hole in nursery budgets – and the low wages of their workforce. Indeed, the Institute for Fiscal Studies has reported the childcare sector has faced a 13% real terms funding cut since 2017/18.

Without a comprehensive workforce plan for childcare – including improved pay and progression routes – the sector will continue to struggle to recruit and help fulfil the Government’s promise. All the while, parents will be anxiously waiting to see if they can find a nursery place for their child so they can re-enter the workforce.

What was missing?

Perhaps surprisingly given the Chancellor’s stated aims, there were no additional measures announced to reform the welfare system to ensure it provides support for those seeking work, nor in terms of longer-term skills funding or investment in the transition to a net-zero economy.

And while the opportunity to strengthen job quality and security through a new Employment Bill during this Parliament had already been missed before today’s Budget Statement, each of these areas remain crucial towards genuinely creating a higher wage, higher skill economy.

As we approach the next General Election, it remains to be seen whether the policies set out in the Spring Budget will improve the persistently poor poll ratings for the Conservatives or contribute to an improvement in the UK’s economic performance. But they do underline that whichever Party wins the next General Election, they will inherit a series of deep and wide-ranging challenges, with extremely limited fiscal room to manoeuvre.

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