Last Spin Of The Wheel

Next week marks what is likely to be this Government's final Budget before the upcoming General Election. The question on everyone's mind is what approach Chancellor Jeremy Hunt will take?

A bribe to the electorate, or a basket case of an economy tied with a bow to Keir Starmer?

Given the constraints, substantial tax reductions may not be feasible without inviting scrutiny.

Therefore, it's plausible that the Budget will adopt a pragmatic tone, reflecting an awareness that the current administration may not be at the helm much longer.

This could pave the way for an early General Election, possibly in May, aimed at swiftly redirecting public attention from what might otherwise be seen as a lacklustre Budget.

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I suspect this Budget will be one of retrospection and commendation, with the government set to boast of its "achievements" in meeting their "pledges" while steering the economy towards "recovery". Rather than promising extensive tax cuts, they will likely position themselves as the custodians of fiscal responsibility, asserting that it is they, not them, who are the most capable of maintaining economic stability. They will use this as a platform to caution a change in leadership to Labour could lead to tax increases, framing themselves as the party of conservative economic prudence. Like it used to say on the tin.

But of course, speculation remains rife regarding potential tax cuts and their financial viability, so what could be announced?

The focus remains on the government's ability to create fiscal headroom, which is crucial for justifying any tax cuts. The Institute of Fiscal Studies suggested at a recent event that if tax reductions are on the agenda, they should aim to stimulate employment and economic growth, favouring national insurance cuts as they benefit the working population more directly and cost-effectively compared to other tax reductions.

The Resolution Foundation meanwhile presented its take, emphasising the potential for a £10 billion increase in fiscal headroom due to lowering interest rates and a larger population, primarily driven by immigration. This demographic shift could boost GDP and create room for tax cuts without proportionally increasing public spending.

If we are to receive any tax cuts, the following are most likely:

Further Reduction in National Insurance Contributions (NICs)

This cut would primarily benefit those in employment, aligning with the government's focus on supporting workers and stimulating economic activity.

Maintaining or Extending the Reduction in Fuel Duty

Given the ongoing cost-of-living pressures, there might be a continuation or extension of the fuel duty reduction to alleviate financial strain on consumers.

Potential Reduction in the Basic Rate of Income Tax

While considered less likely than a NICs cut due to its broader impact and higher cost, a reduction in the basic rate of income tax remains a possibility, especially given past commitments and its direct effect on take-home pay for a wide range of taxpayers.

Anything else?

I've discussed the non-dom status and it's potential elimination in a separate article. Should this measure be implemented it will serve more as a headline grabber than tax bagger.

There's outside chance tax cuts could involve altering the Stamp Duty Land Tax (SDLT) structure, potentially by raising the threshold at which SDLT becomes payable or adjusting rates to stimulate the housing market.

And how about the people's favourite, the abolition of Inheritance Tax?

I’d say there’s more chance of landing a double zero on a single zero roulette wheel.