An election winning budget? Whitehouse's analysis of the Spring 2024 budget

Budgets are always more about politics than they are about economics. But the politics also get more complicated in a general election year.

The Chancellor’s messaging today was all about the Tories as "tax cutters" and Labour as "tax raisers". This is clearly the wedge issue that the Tories are determined to use in the general election campaign, and possibly in another fiscal event later this year when we can expect more tax cut announcements. But the danger is that whilst today’s announcements may be helpful for getting the Conservative core vote out, the rest of the country don't feel that the economy has turned a corner and further encourages them to vote Labour.

There is political sense in reforming the non-dom policy and using that money for tax cuts for families via child benefit changes. This is politically difficult for Labour to reverse as they don’t want to be accused of reimposing taxes on families, and it deprives Labour of one of its major revenue raisers for a plethora of its key policies. With Rachel Reeves determined not to raise basic income tax or VAT and so avoid being ‘same old tax-and-spend Labour’, the Shadow Chancellor will have to go back to the drawing board on funding promises.

But as the old parliamentary saying goes, ‘The enemy isn’t in front of you; they’re behind you’. So, whilst the official opposition was facing the Chancellor this afternoon, his enemies were sat behind him on the Tory backbenches. For months the Tory right has been clamouring for tax cuts and Conservative internal politics means that Hunt and Sunak have been under enormous pressure. Whilst income tax cuts were deemed too expensive and too inflationary, Tory backbenchers will have to be satisfied with the Chancellor’s cuts to national insurance.

As it is an election year, we had the traditional praising of Tory MPs in marginal seats who have ‘succeeded’ in ‘influencing’ the Chancellor on issues such as freezing fuel duty and alcohol duty; announcements that were as inevitable as the sun rising. The changes to holiday let homes will also play well with residents in Tory marginals in the south-west. But what was interesting was how concerned the Chancellor clearly is for his own seat in Surrey, hence the namedropping of his local pub and slamming the Liberal Democrats who are breathing down his neck in his redrawn constituency. This budget could have been Hunt’s legacy, but he is clearly determined to still have a political future.

During a cost-of-living crisis the politics and the economics are intertwined, and unless the changes announced today make people feel richer than they are highly unlikely to reward the party of government. The Chancellor is pleased that inflation is predicted to fall to close to the 2% target later this year, but voters are unlikely reward the Tories for prices being enormously higher than they were a few years ago. With floating voters unlikely to be convinced, the Conservatives are moving further and further away from having a chance of winning the election.