Hunt’s Budget optimism fails to convince

The 2p cut in National Insurance will make little difference to people still struggling to cope with the high cost of living

In March last year, Jeremy Hunt concluded his Spring Budget speech in the Commons by saying: “The declinists are wrong, and the optimists are right. We stick to the plan because the plan is working.” Presumably his plan did not involve entering a recession, even a mild one, as the UK has just done.

Yesterday, the Chancellor was similarly upbeat as he assured MPS that “we have turned the corner on inflation” and, as a result, “we will soon turn the corner on growth”. He even threw in a few jokes, including a suggestion that Keir Starmer should join him on his marathon training after Labour peer Peter Mandelson urged his party leader to “shed a few pounds”.

The problem with such jollity is that it may jar with the mood of the nation. As Starmer said in his response to the Budget, food prices are 25 per cent higher than two years ago, rent shave risen by 10 per cent, and a typical family remortgaging their home this year will pay an extra £240 a month.

One reason why the recession has not been longer and deeper is the positive impact of record levels of immigration on the size of the UK economy. But GDP per capita shows people have actually been getting poorer for two years, not just the formal six months of recession.

Such factors are the driving force behind the Conservatives’ slide in the polls. After 14 years, their approach to running the country has become discredited in the minds of many.

It feels like the UK has never really recovered from the 2008 financial crash. Admittedly, this is partly because of the Covid pandemic and the energy price crisis caused by Putin’s invasion of Ukraine, but Brexit was a self-inflicted blow or, rather, a Conservative-inflicted one. The calamitous performances of Boris Johnson and Liz Truss as Prime Minister only add to the overall picture of poor government.

That said, the Budget did contain some reasonable measures. The plan to increase public sector productivity by investing in IT and taking advantage of advances in artificial intelligence, particularly in the NHS, is a sensible measure that should bring lasting, longterm benefits. The only criticism is that it is overdue.

The 2p cut to National Insurance will put money in people’s pockets, although the average employee’s voting intentions may not be swayed by having an extra £8.65 a week to spend, given the cost of living has risen so fundamentally. This was the much-trailed ‘feel-good’ measure in the Budget, but Hunt’s attacks on Labour for being a high-tax party seemed ill-judged given taxation under the Conservatives has risen to a historic high.

The Chancellor’s decision to extend the windfall tax on North Sea oil and gas by a year to 2029, raising an estimated £1.5 billion, caused a row in his own party with Scottish Conservative leader Douglas Ross describing it as “deeply disappointing”. However, high energy bills and the march of climate change – with last month the world's warmest February on record – mean that raising taxes on the sector is less politically difficult than it once was, particularly for Chancellors in need of ways to make the books balance while cutting personal taxation.

Thankfully, Hunt avoided the temptation to deliver a Budget full of reckless giveaways for purely electoral purposes. The lessons of ‘Trussonomics’ appear to have been well and truly learned.

But the reheating of last year’s misplaced optimism was unconvincing and betrayed the lack of a comprehensive plan which would give people genuine hope that, after years of gloom, a brighter future is finally within reach.