The House of Lords is due to debate the spring budget on 18 March 2024.

1. Economic and fiscal context

Since the first quarter of 2022 UK GDP has been broadly flat, with slight growth in late 2022 and early 2023 offset by a slight contraction in the second half of 2023.[1] However, given that the population is rising, this means that GDP has been falling in per capita terms. The Office for National Statistics (ONS) has estimated that GDP per head decreased by 0.7% in 2023.[2]

The rate of price growth has fallen over recent months but remains elevated. The ONS estimates consumer price index (CPI) inflation to have been 4% in the 12 months to January, double the 2% target set by the government.[3] The Bank of England’s monetary policy committee suggested at the start of February 2024 that inflation could fall down to its target within a few months (as a result of lower oil and gas prices), but expects it to rise again in the second half of the year.[4] The Bank’s main interest rate is currently set at 5.25% and the monetary policy committee has committed to keeping interest rates relatively high until inflation “settles at 2%”.

As well as increasing borrowing costs for households and businesses, the Bank of England’s contractionary monetary policy is having a significant impact on the public finances. Higher interest rates have increased the cost of servicing government debt and HM Treasury is liable for any losses that the Bank of England makes selling government bonds it bought in previous quantitative easing programmes back to the market.[5] Prior to the pandemic the government’s debt interest costs fell to below 2% of GDP, but in November 2023 the Office for Budget Responsibility (OBR) forecast that the government’s debt interest costs would rise to 4.3% of GDP (£116bn) in 2023/24 and remain at at least 3.5% of GDP up to 2028/29.[6]

2. Main measures in the budget

The chancellor of the exchequer, Jeremy Hunt, delivered the spring budget to the House of Commons on 6 March 2024, describing it as a “budget for long term growth”.[7] Mr Hunt noted that interest rates still remained high, but that because progress had been made towards delivering the prime minister’s economic priorities—halving inflation, growing the economy, and reducing debt—the government was now able to help families “not just with temporary cost of living support, but with permanent cuts in taxation”.[8]

As illustrated in table 1 below, the total cost of the policy decisions announced in the budget amounts to £13.9bn in the coming financial year (2024/25) and £6.5bn by the end of the forecast period (2028/29). The vast majority of these costs relate to tax reductions, rather than increases in public spending.

Table 1. Total cost of policy decisions across the forecast period (£bn)

2024/25 2025/26 2026/27 2027/28 2028/29
Total tax policy decisions 13.8 10.6 7.6 6.0 6.5
Total spending policy decisions 0.1 0.9 0.9 0.8 -0.1
Total policy decisions 13.9 11.5 8.5 6.8 6.4

(HM Treasury, ‘Spring budget 2024’, 6 March 2024, HC 560 of session 2023–24, p 68)

2.1 Taxation and benefits

The most significant tax and benefit decisions announced by the chancellor, in terms of fiscal cost, were as follows:[9]

  • National insurance contributions (NICs). From 6 April 2024:
    • The main rate of class 1 employee NICs will be reduced from 10% to 8%.
    • The main rate of class 4 self-employed NICS will be reduced from 8% to 6%.
  • High income child benefit charge (HICBC). The income threshold at which the HICBC starts to apply (and child benefit starts to effectively be withdrawn) will rise from £50,000 to £60,000, with the rate at which the HICBC applies reduced, such that child benefit is not withdrawn in full until individual parents earn £80,000 or more.
  • Fuel duty. The temporary 5p cut to fuel duty will be extended for a further 12 months and the planned inflation-linked uprating for 2024/25 has been cancelled. (The planned uprating has been cancelled every year since 2011/12.)
  • Alcohol duty. Duty rates will be frozen until 1 February 2025.

The NICs cuts were by far the largest of these measures, costing around £10bn per year.

The tax reductions and benefit increases were partly offset by a series of revenue raising measures, including the following:[10]

  • Taxation of non-domiciled individuals. From 6 April 2025 the existing regime will be replaced by a residence-based regime, whereby UK residents start paying UK tax on foreign income and gains following four years of residency.
  • Energy profits levy. From 1 April 2028 the levy will be extended for one year. (The levy was introduced as a temporary measure in May 2022 to tax the exceptional profits of oil and gas companies arising from unexpectedly high oil and gas prices.)
  • Stamp duty land tax multiple dwellings relief. From 1 June 2024 the stamp duty relief for bulk purchases will be abolished.
  • Furnished holiday lettings. From 6 April 2025 the preferential tax regime for short-term holiday lets will be abolished.
  • Vaping duty. From 1 October 2026 a duty will be introduced on vaping products.
  • Tobacco duty. From 1 October 2026 a one-off increase in tobacco duty will be introduced to maintain the financial incentive for choosing vaping over smoking.
  • Air passenger duty. Non-economy class rates will increase from 2025/26.

2.2 Spending

The government reaffirmed its plan for planned departmental resource spending, for the years beyond the current spending review period (2025/26 to 2028/29), to grow at 1% a year on average in real terms and for public sector capital spending to be frozen in cash terms.[11]

The only significant new public spending commitment made by the chancellor was to provide the NHS with £2.6bn over a three-year period (from 2025/26) to make productivity enhancing investments.

2.3 Other measures

A number of other policy decisions were also announced by the chancellor, such as:[12]

  • UK ISA. The government has proposed the introduction of an additional individual savings account (ISA), with individuals able to invest £5,000 per year tax-free in UK-based assets, in addition to the £20,000 allowance for existing ISAs.
  • Extension of the recovery loan scheme (RLS). The RLS, which was initially introduced in 2022 to help small and medium sized enterprises (SMEs) to access the finance they need to grow and invest, has been renamed as the growth guarantee scheme and extended until the end of March 2026. The scheme offers 70% government guarantees on loans to SMEs of up to £2mn in Great Britain and £1mn in Northern Ireland.
  • Extension of freeport tax reliefs. The tax reliefs available in freeport tax sites are being extended from five to 10 years, until September 2031 in England, and September 2034 in Scotland and Wales.

3. Fiscal forecast

The OBR published its ‘Economic and fiscal outlook: March 2024’ alongside the budget. The OBR said that the overall outlook for the public finances was similar to November 2023, when it published its last forecast alongside the autumn statement. It said it expected inflation and interest rates to be lower over the coming years relative to its earlier forecast. However, while this has reduced the government’s projected debt servicing and welfare costs, it has also reduced expected tax revenue growth, leaving forecast borrowing “largely unchanged in five years’ time”.

The OBR noted that the chancellor’s package of tax reductions was partially offset by other tax rises later in the forecast period, allowing the government’s main fiscal rule—for underlying public debt to be falling as a share of GDP in 2028/29—to be met. However, the margin by which it is now projected to be met, £9bn, is lower than the £13bn projected in the autumn statement.[13] The table below illustrates the OBR’s latest forecast for public sector borrowing and debt.

Table 2. Public sector borrowing and debt (% GDP)

2024/25 2025/26 2026/27 2027/28 2028/29
Public sector net borrowing 3.1 2.7 2.3 1.6 1.2
Public sector net debt (excluding the Bank of England) 91.7 92.8 93.2 93.2 92.9

(Office for Budget Responsibility, ‘Economic and fiscal outlook: March 2024’, CP 1027, 6 March 2024, p 154)

The OBR said that high debt, subdued economic growth, and high interest rates made the UK’s fiscal position “very challenging”. It said:

Economic and market conditions mean the government needs to run a primary surplus (revenues minus spending, excluding interest) of around 1.3 percent of GDP just to stabilise debt in the medium term. By comparison across the 2010s, on average, debt could be stabilised while running a primary deficit of 2.1 percent.

The OBR noted that the government was only able to meet its main fiscal rule as a result of “tax as a share of GDP rising to near a post-war high” and “per person spending on public services being held flat in real terms”. It said that the government’s departmental spending plans for 2025/26 onwards represented a “significant risk” to its fiscal forecast, given that they implied real terms spending cuts for some public services which were already under strain and could, therefore, prove difficult to implement.

4. Economic forecast

The OBR assessed that inflation had been falling more quickly than it previously expected and that interest rates were now forecast to decline more sharply. It said these factors would “strengthen near-term growth prospects”. Over the medium-term, however, the OBR said its forecast for potential output growth over the coming five years remained largely unchained. Regarding the underlying trends affecting its forecast for potential output, it said:

Higher net migration, lower interest rates, and lower energy prices boost population growth, business investment, and productivity respectively. But the latest data on labour participation, demographic and other factors have led us to revise down the overall trend participation rate and average hours worked. The net effect of these changes leaves the level of output 0.1 percent lower in 2028 than forecast in November [2023], but 0.1 percent higher after accounting for the policies in this budget that boost labour supply.

The table below provides a summary of the OBR’s latest projections for several key economic indicators, relative to what they were previously expecting in November 2023.

Table 3. Forecast for selection of economic indicators (relative to previous forecast), 2024–28

2024 2025 2026 2027 2028
GDP growth (%) 0.8 (0.7) 1.9 (1.4) 2.0 (2.0) 1.8 (2.0) 1.7 (1.7)
Inflation (%) 2.2 (3.6) 1.5 (1.8) 1.6 (1.4) 1.9 (1.7) 2.0 (2.0)
Average earnings growth (%) 3.6 (3.7) 2.1 (2.2) 2.0 (2.0) 2.3 (2.5) 2.6 (2.8)
Unemployment rate (%) 4.4 (4.6) 4.4 (4.6) 4.2 (4.4) 4.2 (4.2) 4.1 (4.1)

(Office for Budget Responsibility, ‘Economic and fiscal outlook: March 2024’, CP 1027, 6 March 2024, p 146; and ‘Economic and fiscal outlook: November 2023’, 22 November 2023, CP 944, p 148)

The OBR noted that, following a record fall in 2022/23, living standards (measured by real disposable household income per person) were now forecast to recover more quickly than expected, reaching pre-pandemic levels by 2025/26, two years earlier than previously expected. The faster recovery was partly due to the recent rise in the price of imported energy “unwinding more quickly and fully” than previously expected, as well as policies announced in the budget (such as the reduction in NICs) boosting household incomes.

5. Reaction to the budget

5.1 Political

The leader of the opposition, Keir Starmer, said that the budget was “the last desperate act of a party that has failed”, noting that the budget forecast confirmed this would be “the first parliament since records began to see living standards fall”.[14] He said the Conservative Party was:

[…] stubbornly clinging to the failed ideas of the past, completely unable to generate the growth that working people need, and forced by that failure to ask them to pay more and more for less and less.

However, Mr Starmer did say that his party would support various measures in the budget—such as the proposed cuts to NICs and the fuel duty freeze—as part of its campaign to lower the tax burden on working people.

The chair of the House of Commons Treasury Committee, Harriett Baldwin (Conservative), welcomed some of the changes in the OBR’s forecasts, such as the faster than previously expected falls in inflation and interest rates.[15] She also welcomed the move to cut NICs, which she said was a “smart way” to help growth and cut taxes for working people, as well as the reforms to the HICBC, which she said would increase incentives to work. She also highlighted her committee’s recent report on the Bank of England and its quantitative tightening, noting that this was increasing the government’s borrowing costs.[16] She said her committee wanted to “send a message to the independent Bank of England about some of the ways in which quantitative tightening has an impact on the real economy”.

Drew Hendry, SNP economy spokesperson, welcomed a number of measures, such as the reforms to the HICBC and non-domiciled taxation, but said there was “not a lot of sense” in the NICs reductions given they provided “very little for people on low incomes, and zero for 17.8 million people on less than £12,750 a year”.[17] He suggested that:

People will see straight through attempts by the chancellor to make up for falling living standards, underfunded public services and wage stagnation with these poorly timed national insurance cuts, which will not improve overall standards of living for most households.

Ed Davey, leader of the Liberal Democrats, described the chancellor’s statement as a “bottom-of-the-barrel budget” and called on the government to hold a general election.[18] He said he had never seen a government “deliver weaker public services, higher taxes and zero growth all at the same time, and all in the middle of a cost of living crisis”.

5.2 Think tanks

Paul Johnson, director of the Institute for Fiscal Studies, welcomed the focus on cutting national insurance rather than income tax, a move which “marks a clear break with the trend of the past half-century, during which headline income tax rates have come down and national insurance rates have, until now, inched up”.[19] He said this would reduce the tax wedge between different sorts of income and should have “marginally positive work incentive effects”. Mr Johnson also welcomed the reforms to child benefit and the non-domiciled resident tax regime. However, he said the big picture remained one of taxation rising significantly over the course of the parliament and households due to be “worse off at the time of the next election than they were at the last, following nugatory real earnings growth”. Moreover, he said that the chancellor had only managed to meet his fiscal rules with a set of post-election spending plans that “still imply substantial cuts to funding of many public services which are clearly struggling with their current level of funding”.

Similarly, the Resolution Foundation highlighted the fact that this was due to be “the first parliament in modern history to see a fall in living standards”.[20] It said that tax reductions announced in the budget were of a smaller magnitude to tax rises recently implemented:

Fresh reductions in national insurance and fuel duty, coupled with previously announced tax threshold freezes, mean a net tax cut of £9bn is taking effect in the election year. But this is dwarfed by the estimated £27bn of tax rises that came into effect last year (2023/24) and the £19bn that are coming in after the election (2025–27).

Torsten Bell, chief executive of the Resolution Foundation, said that the “big picture for Britain has not changed at all” and that it remained “a country where taxes are heading up not down, and one where incomes are stagnating”. Additionally, he said that whoever wins the next election will have to “wrestle with implausible spending cuts”.

The National Institute of Economic and Social Research described the budget as “low-key” and “unlikely to unlock the UK’s growth and productivity problems”.[21] It described the NICs reductions as “regressive” and said the measure would “not boost living standards significantly”, noting that living standards for the bottom 10% of households were around 20% below pre-pandemic levels. It also argued that a new fiscal framework was necessary, stating that the “focus on arbitrary debt and deficit targets is not what should determine fiscal policy”.

The Institute for Public Policy Research (IPPR) said the budget implied “unfeasible and undesirable public spending cuts in the future” and put “politics ahead of the nation”.[22] Harry Quilter-Pinner, IPPR director of policy and politics, said:

No one believes that future cuts to day-to-day spending are possible, or that squeezing public investment further is sensible, yet the government chose to slash taxes today at the expense of crashing public services tomorrow.

George Dibb, associate director for economic policy at IPPR, said that “cutting NICs is not the right priority right now”, with nearly half of the proceeds going to the richest fifth of households and just 3% going to poorest fifth. However, he said that measures such as the reforms to non-domiciled taxation, ending the preferential tax regime for holiday rentals, and increasing air passenger duty for non-economy classes were “first steps that show how the government could find more resources for better public services from those most able to support this”.

Sebastian Payne, director of Onward, said the chancellor had “made the best of a bad hand”, welcomed the NICs reductions and the changes to the HICBC, and said that the main challenge now was to boost economic growth.[23] He said the most welcome news was that inflation was now expected to fall more quickly, something he suggested would help to ease the cost of living crisis.

Tom Clougherty, executive director of the Institute of Economic Affairs, said that the tax cuts announced in the budget would “provide some relief from the rising cost of living, but ultimately won’t do much to revive the stagnating economy that lies behind most of our current woes”.[24] He said that “raising living standards in the long run depends on generating faster economic growth” and that “if we take a broader view of economic policy, it hasn’t really moved us any closer to where we need to be”.

6. Read more

Cover image by Simon Walker/No 10 Downing Street on HM Treasury Flickr account.


  1. Office for National Statistics, ‘Gross domestic product index: CVM—seasonally adjusted’, 15 February 2024. Return to text
  2. Office for National Statistics, ‘GDP first quarterly estimate, UK: October to December 2023’, 15 February 2024. Return to text
  3. Office for National Statistics, ‘Consumer price inflation, UK: January 2024’, 14 February 2024; and HM Treasury, ‘Monetary policy remit: Autumn statement 2023’, 22 November 2023. Return to text
  4. Bank of England, ‘Monetary policy report: February 2024’, 1 February 2024. Return to text
  5. House of Commons Treasury Committee, ‘Bank of England has taken a leap in the dark on quantitative tightening, Treasury Committee concludes’, 7 February 2024. Return to text
  6. Office for Budget Responsibility, ‘Economic and fiscal outlook: November 2023’, 22 November 2023, CP 1027, p 95. Return to text
  7. HC Hansard, 6 March 2024, cols 837–52. Return to text
  8. For the prime minister’s priorities see: Prime Minister’s Office, ‘Prime minister outlines his five key priorities for 2023’, 4 January 2023. These priorities have also been referred to as pledges and promises. See: Conservative Party, ‘Your priorities are our priorities: Rishi Sunak sets out our vision for you’, 4 January 2023. Return to text
  9. HM Treasury, ‘Spring budget 2024’, 6 March 2024, HC 560 of session 2023–24. Return to text
  10. As above. Return to text
  11. As above, p 68. Return to text
  12. As above. Return to text
  13. Office for Budget Responsibility, ‘Economic and fiscal outlook: March 2024’, 6 March 2024, CP 1027, p 131. Return to text
  14. HC Hansard, 6 March 2024, cols 856–60. Return to text
  15. HC Hansard, 6 March 2024, cols 860–1. Return to text
  16. House of Commons Treasury Committee, ‘Bank of England has taken a leap in the dark on quantitative tightening, Treasury Committee concludes’, 7 February 2024. Return to text
  17. HC Hansard, 6 March 2024, cols 863–7. Return to text
  18. HC Hansard, 6 March 2024, cols 874–6. Return to text
  19. Institute for Fiscal Studies, ‘Spring budget 2024: Initial IFS response’, 6 March 2024. Return to text
  20. Resolution Foundation, ‘Chancellor reverses the policy priorities of the 2010s, rehashes its austerity, and records the first ever polling-day-to-polling-day fall in living standards’, 7 March 2024. Return to text
  21. National Institute of Economic and Social Research, ‘Low-key budget unlikely to unlock productivity growth: NIESR’s response to the spring budget 2024’, 6 March 2024. Return to text
  22. Institute for Public Policy Research, ‘‘Slash-and-crash’ budget puts politics ahead of the nation, says IPPR’, 6 March 2024. Return to text
  23. Sebastian Payne, ‘Personal X account’, 6 March 2024. Return to text
  24. Institute of Economic Affairs, ‘Budget ‘hasn’t really moved us any closer to where we need to be’, says IEA executive director’, 6 March 2024. Return to text