Early Budget to spark early election?

The 2024 Spring Budget will be held on Wednesday 6 March, the Treasury has confirmed.

In a release published yesterday, the Treasury said Chancellor Jeremy Hunt has also commissioned the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast.

The Spring Budget must take place before the end of March but is typically held in the second or third week. The decision to hold the event early in the month has fuelled speculation that the government may opt for an early election. Prime Minister Rishi Sunak has until January 2025 to send voters to the polls.

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Next year’s Spring Budget could therefore present the final opportunity for the government to get voters onside, and ultimately cling on to power. The Conservative Party is currently trailing Labour in the polls, and tax giveaways are an obvious tactic to try and reduce the deficit.

While it’s far too early to know whether the government is set to unveil a host of vote-winning pledges at next year’s event, let’s briefly round up what’s spinning the pre-Budget rumour mill right now.

Cuts to income tax and IHT in the pipeline?

Despite pre-Autumn Statement reports that Hunt was eyeing up reform to both income tax and inheritance tax (IHT), neither came to pass. There were, however, tax giveaways for workers in the form of national insurance contribution (NIC) cuts and incentives for businesses.

That said, the government maintained the freeze on tax-free thresholds – a process known as fiscal drag – which is dragging more and more people into paying higher rates of tax. This has propelled UK receipts to their highest level since records began 70 years ago.

But although the government opted against income tax and IHT reform in November, these could still be on the table at next year’s Spring Budget as the Conservative Party launches a final bid to woo voters.

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Reports in November suggested that Hunt was considering cutting the top rate of IHT from 40% to either 30% or 20% and may also shake up the current tax-free thresholds. There were even suggestions the chancellor might scrap the tax altogether.

Given the negative sentiment around IHT - it’s largely considered the UK’s most-hated tax - any decision to reform the current system would prove popular with voters.

The latest figures from HM Revenue and Customs (HMRC), published last week, show that IHT receipts increased to £5.2 billion in the eight months from April 2023 to November 2023 – a £400 million uptick on the same period last year.

Cuts to income tax may also find favour with the public as the tax is paid by more than 32 million people.

Support for first-time buyers

House prices may have crept down this year, but soaring property valuations over the past two decades have made it increasingly difficult for budding homeowners to get a foot on the ladder. Rising mortgage rates off the back of higher interest rates have made the task even harder.

Housing minister Michael Gove hinted to TheTimes that the Tories could cut up-front costs for first-time buyers to sway younger voters.

There are two measures reportedly being considered. The first is a scheme for longer fixed-term mortgages, which could ease the requirement for hefty deposits. The second is to resurrect the help-to-buy scheme, which closed to new applications on 31 October 2022, and was kiboshed in March 2023. The scheme enabled aspiring homeowners to buy their first home with a deposit as low as 5%.

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Gove told TheTimes: “We have been asking the question, how can we ensure that people with decent incomes who are finding it difficult because of the scale of deposit required can get on to the housing ladder?

“I don’t want to pre-empt anything...but it’s about looking at some of the rigidities in the mortgage market which they haven't got in other jurisdictions.”