The UK Government’s Spring Statement: One last roll of the dice

Whispers in Whitehall about the potential of a May General Election reached fever pitch with the UK Government’s Spring Statement, announced today.

After two years of a cost-of-living crisis and a 41-year inflation high in October 2022 because of rising energy and food costs – in part, brought about by the wars in Ukraine and Yemen (and critics will also point to the Truss/Kwarteng mini-Budget) – this Statement will be crucial for the Conservative Government’s fortunes in the forthcoming election.

With inflation holding steady at 4% in January 2024 and expected to fall below 2% within the next few months, but with the UK tipping into recession during the last half of 2023, and the potential for “stagflation” this year, how the Budget will support businesses in the UK and Wales to grow and create more jobs will pose the biggest question. To make some headway before the polls and hold onto as many of its seats as possible, the Conservative UK Government needs to be able to quickly provide stability and security for businesses and voters, should it call a General Election in May.

With the Conservatives trailing Labour by 20% across the UK and by 23% in Wales, whether this Statement will impress Welsh voters’ needs is key.

Turning to the Statement’s announcements, the overarching theme of the UK Government is a “long-term Budget for growth”, supporting investment. Furthermore, there are shades of value-for-money in the public sector by carrying on announcements in the Autumn Statement, such as the Public Service Productivity Plan, which is aimed at delivering £1.8bn worth of benefits by 2029 and, should productivity return to pre-pandemic levels, £20bn of savings. Planned growth in departmental spending will be kept at just 1% in real terms.

The headline – a further 2p cut in National Insurance from 6th April – is predicted to save the average employee £450 per year. Interestingly, however, the Chancellor sets up a potential Conservative Manifesto pledge in his overall long-term ambitions with National Insurance and income tax – to “simplify” the system.

Turning to businesses, the Chancellor’s announcements of freezing alcohol duty will have an indirect impact on the Welsh hospitality sector, and the confirmation of the 75% business rates relief in England for its hospitality sector will surely make Wales’s businesses look on with envy, given the Welsh Government’s announcement of its reduction to 40% in Wales.

Wider economic policies which are implemented in Wales – such as the extension of the Investment Zones Programme to ten years and tax reliefs for the Celtic and Anglesey Freeports until 2034 are aimed at attracting more money into Wales as a result. It is worth noting that both Freeports are in areas where Conservatives will aim to shore up their votes in the General Election.

Clean energy is still a priority within the Budget, with a £160 million deal with Hitachi to purchase the Wylfa nuclear site in Ynys Môn – again, key for Virginia Crosbie MP, who will be defending a three-way marginal seat this year against Labour and Plaid – as well as speeding up electricity grid connection times, which may help Wales-based energy companies.    

Smaller announcements for Wales, including £5 million for an Agri-food launch pad in Mid and North Wales; £20 million for Rhyl for community regeneration, £10 million for Venue Cymru and Theatr Clwyd receiving £1.6 million for a refurbishment, also feature in the Chancellor’s speech and are squarely aimed at increasing Conservative votes in the new Clwyd East, Clwyd North and Bangor Aberconwy.  

From the Welsh Government’s perspective, they will be disappointed to receive only £170m extra for Welsh public services. The Welsh Government’s calculations placed the funding gap and inflationary pressures at £1.2bn, resulting in cuts to some public services, as announced in its Final Budget, published last week.

Overall, the reception to the Chancellor’s Budget has been muted. It’s been a balancing act between keeping inflation down while growing the economy, but hardly the pre-election Budget we’d be expecting.