Here are the major policy announcements:
Mr Hunt has certainly been more subtle than his predecessor Kwasi Kwarteng. The now infamous ‘mini budget’ was filled with unfunded tax cuts, which instead of inspiring the growth that has been alluding Britain for so long, inspired a major sell-off in the Gilt market, effectively raising interest rates and bringing the pound to an all-time low. Determined to avoid such embarrassment, Hunt has proved himself to be on the more moderate fiscal side of the Tory party. But critics have claimed he has been too timid, or even dishonest with the framing of his budget.
Shadow Chancellor Rachel Reeves has accused the government of raising the tax burden through fiscal drag (not raising thresholds in line with inflation). “The government has given with one hand and taken much more with the other,” she stated. BBC presenter Amol Rajan even labelled Hunt the ‘fiscal drag queen’ in a fiery Paxman-style interview on Radio 4.
According to the Office for Budget Responsibility (OBR), tax as a share of GDP will hit 37.1% by 2028-29, 4% of GDP higher than the pre-pandemic level. This is approaching the post-war highs in the late 1940s, debt to GDP is now over 100% so we can expect this level of tax burden to continue or even rise. While our tax burden is less than many of our European counterparts, it is far more than the US. This leaves the UK in a bizarre midpoint between the desire for European public services and the dream of a vibrant American private sector.
But what is in this Budget for me? For students, not much. In the run-up to the budget, Martin Lewis lobbied the government to increase student living loans to keep up with inflation. With most living loans not even covering rent, students have been hammered by the cost-of-living crisis. A study from the Russell Group found that ‘1 in 4 students regularly go without food and other necessities because they cannot afford them.’ This budget has failed to address that issue, and with the recent rises in interest rates on student loans (linked to inflation), students can expect to be paying the government a lot of money throughout their lifetimes. For working families, the changes to National insurance and child benefits will undoubtedly be welcomed, but the freezing of the tax thresholds will still be a hard pill to swallow.
The Budget contains numerous other small tweaks but is not the typical budget of a party about to go into an election. The sad reality of public finances is that they are fundamentally political, particularly in an election year. It appears to many that this budget will set up a further set of more radical changes to public finances to bolster a Conservative election campaign. With debt and tax levels higher than ever, along with deteriorating public services and stagnating growth, the Treasury is going to need more imagination than tax changes to turn things around, but then again, to a man with a hammer everything looks like a nail.