To: All MPs
Spring Budget 2024
Dear Colleague,
Following my statement to the House of Commons earlier this afternoon, I am writing to you on Spring Budget 2024.
The last few years have not been easy for the British economy. We’ve faced the legacy of Covid, war in Ukraine and the Middle East. These challenges have made life tough for people in Britain.
Since the beginning of 2023, we have been working on five priorities. Three of them are economic: To halve inflation, grow the economy, and reduce debt.
We have made some good progress on these priorities: Inflation has fallen from 11.1 per cent to 4.0 per cent; the economy has performed better than forecast, and outperformed European neighbours; and debt is on track to fall as a share of GDP to 92.9% in 2028-29.
Cutting Tax
The job is not done. However, because of the progress we have made, the economy is turning a corner and we have been able to afford further tax cuts as part of our plan to reward work and grow the economy.
Today I announced that I am:
- Cutting the employee main rate of National Insurance contributions (NICs) by 2p from 10% to 8%. Combined with the 2p cut announced at Autumn Statement 2023, an average worker on £35,400 will receive a tax cut of over £900 per year.
- Cutting the main rate of self-employed NICs by a further 2p, on top of the 1p cut announced at Autumn Statement 2023. Combined with the abolition of the requirement to pay Class 2 NICs, this will save an average self-employed person on £28,around £650 a year.
The government will introduce a NICs bill on Thursday 7th March to legislate for these changes, both of which will take effect from 6 April 2024.
The OBR have confirmed that cutting NICs at Autumn Statement 2023 and Spring Budget 2024 will mean the equivalent in hours worked of around 200,000 more people in work by 2028-29.
The Government believes that making work pay is of the most fundamental importance, and our long-term ambition is to end the unfairness of double taxation of work. Where it is responsible to do so, and can be achieved without compromising high-quality public services, we will therefore continue to cut National Insurance as we have done today.
The Child Benefit system is another part of the tax system the government wants to make simpler and more straight forward. I am committed to removing the unfairness of the High Income Benefit Charge system towards single-earner families, and will move to a system based on household rather than individual incomes by April 2026, consulting in due course.
In the meantime, from April 2024, I will raise the threshold for the High Income Child Benefit Charge to £60,000 taking 170,000 families out of paying this tax charge. The rate will also be halved so that Child Benefit is not repaid in full until you earn £80,000.
Sustainable Public Finances
Departmental spending has increased significantly over this parliament in the face of unprecedented economic and geopolitical shocks. I today announced additional funding for the NHS in England, providing £2.5 billion of day-to-day funding in 2024-25 to support further progress towards improving performance and reducing waiting times.
However, the average productivity of public services is estimated to be 5.9% below pre-pandemic levels. Returning productivity to pre-pandemic levels would deliver up to £20 billion of productivity benefits a year.
That is why announced today the next steps in the Public Sector Productivity Programme, including a comprehensive NHS productivity plan backed by over £3.4 billion of funding to upgrade vital MRI scanners, and reduce the time frontline workers spend on administrative tasks, freeing them up for more face-to-face time with patients.
The NHS productivity plan is just one part of a wider programme which includes investment in some of the strongest projects identified so far across other public service areas, all of which will deliver £9 billion of benefits over the next 5 years.
However, maintaining sustainable public finances also means ensuring the tax system remains fair and keeps up with economic developments, which is why I have announced:
- The abolition of the current tax rules for non-UK domiciled individuals, or non-doms, and introduction of a simpler, fairer and more competitive residence-based regime.
- Extending the Energy Profits Levy by an additional year until March 2029, raising £1.5 billion.
- A new duty on vaping and increasing tobacco duty from October 2026, which will support the government’s ambitions to create a smokefree generation.
- A further package of measures to tackle tax non-compliance, which is forecast to raise an additional £4.5 billion by 2028-29.
- A series of reforms to make the property tax system fairer, including: abolishing Multiple Dwellings Relief, a bulk purchase relief in Stamp Duty Land Tax; and the Furnished Holiday Lets tax regime.
Supporting Households & Aspiration
I also announced further measures to support households with the cost of living, including:
- An additional £500 million to enable the extension of the Household Support Fund in England from April to September 2024, to continue providing targeted support to vulnerable households with the cost of essentials such as food and utilities, as inflation continues to fall.
- Freezing fuel duty at the current levels for a further 12 months, through extending the temporary 5p cut and cancelling the planned increase in line with inflation for 2024-25, saving the average car driver £50 in 2024-25.
- Extending the alcohol duty freeze from 1 August 2024 until 1 February 2025. This will result in 2p less duty on an average pint of beer than if the planned increase had gone ahead.
Spring Budget 2024 is also a Budget for aspiration. This government will boost housing supply and help the market bring forward tens of thousands of new homes, with a package of interventions that will deliver against commitments made in the Long-Term Plan for Housing.
This package includes cutting the rate of Capital Gains Tax on residential property for higher rate taxpayers from 28% to 24%, which will raise revenue and encourage an estimated 18,000 additional residential property transactions in 2025-26.
Delivering Our Plan for Growth
The government is focused on taking long-term decisions to strengthen the economy, by driving productivity and increasing the number of people in good jobs.
Spring Budget 2024 delivers on the growth measures announced in Autumn Statement 2023, and goes further, through:
- Outlining next steps on the £4.5 billion funding package for strategic manufacturing sectors announced at Autumn Statement.
- New measures to channel more investment into UK equities, including introducing a new UK ISA to support savers.
- Continuing the government’s momentum in making 2024 the year of the SME by raising the VAT registration threshold to £90,000 and extending existing financial support through the Growth Guarantee Scheme.
- Over £1 billion of new tax reliefs for creative industries, including introducing a new UK Independent Film Tax Credit at a rate of 53%, a permanent extension to tax reliefs for theatres, orchestras, museums and galleries, introducing a 40% relief on business rates bills for eligible film studios in England and providing a 5% increase in tax relief for UK visual effects costs in film and high-end TV.
- Delivering sustainable growth and productivity right across the country, by providing further detail on Investment Zones, and continuing to empower local leaders by extending and deepening devolution across England.
The OBR expects that policies announced in this Budget and in the previous two fiscal events will increase the size of the economy by 0.7% by 2028-29. This is through increasing total hours worked by the equivalent of more than 300,000 full-time workers and boosting business investment by £14 billion.
Full details of this package can be found in the Spring Budget 2024 document and other associated documents https://www.gov.uk/government/publications/spring-budget-2024.
Best wishes
RT HON JEREMY HUNT MP
Chancellor of the Exchequer