The Chancellor will deliver his Spring Budget Statement on 6th March. This is likely to be the last major fiscal event of this Parliament. It also provides a formal update of latest estimates of the economic outlook which will provide much of the context for the upcoming General Election.
The economic backdrop is really important to grasp. The Government had to spend £400bn to keep millions of businesses and tens of millions of their employees afloat during the pandemic. The interest burden in servicing that debt has risen, as interest rates were increased, to bring down inflation, which had soared due to the escalation in energy costs after Putin invaded Ukraine. These issues all have a bearing on each other.
While the UK entered a technical recession at the end of 2023 it is likely to have left it at the beginning of this year, making it one of the shallowest downturns in the past century, and the UK economy is forecast to outgrow both France and Germany in 2024. Inflation has more than halved. Unemployment is at close to record lows. Energy costs are declining. Mortgage interest rates have started to fall. Incomes have risen above inflation for the past nine months. Taxes (national insurance) have been cut for 27 million people this year. There are plenty of challenges but the economic backdrop is improving
Readers will know I am not standing again, so this is also the last chance I have had to suggest ideas for any tax or spending decisions which the Chancellor may make to help deliver positive changes for residents of South Shropshire.
I write significantly ahead of the Budget, and have no knowledge of what it might contain. There will be policies of national significance, and I hope that the prudence with which this government has stewarded the economy through the period of high inflation following Russia’s invasion of Ukraine, will now leave some room for manoeuvre, including the possibility of further tax cuts to help stimulate economic growth.
I have joined other colleagues from the Conservative Environment Network in calling for a number of changes, which mostly remove perverse disincentives towards green schemes. For example, given how important farming is to South Shropshire, I have asked the Chancellor to support the River Severn Partnership proposals and to look again at equalling out tax anomalies on agricultural land being used for environmental schemes. I have also called for stamp duty changes to be made to encourage householders to invest in energy efficiency measures when moving house.
I also want to support our hospitality sector, which is crucial to South Shropshire’s economy but has been hit hard in recent years. Readers may have seen that ABTA recently named Shropshire as one of its top ten global destinations – the only place in the UK to feature. So harnessing our hospitality sector will help drive future growth, and I have supported calls to extend rate relief for hospitality businesses, to help ease the burden of rising cost pressures.
My earliest interventions this year were to work with Shropshire Council to put into perspective the financial challenges they face. The Adult Social Care budget continues to absorb a growing percentage of the Council’s finances, not least because South Shropshire is a popular place to retire, and so our demographics are older. Over 30% of our population in South Shropshire is aged over 65, compared to 18% nationally. Last month we secured some increase in the funding allocation to Shropshire Council, but the Council still faces significant budget challenges.
Given my previous role as a Defence Minister, and the very obvious growing threats we face as a nation, I would be encouraged to see further uplift in the Defence budget. I have called for the plan to reduce the size of the Army to be reversed.
Whatever measures we see this month, it will be important to avoid fuelling any further inflation, while using tax changes as a lever to stimulate growth in the economy, which pays for the public services on which we all rely.