ICAEW’s Fiscal Insight on the Spring Budget 2024 provides an analysis of the key numbers, risks to the Office for Budget Responsibility forecast, tax measures, forecast revisions since the 2023 Autumn Statement, the fiscal position in the 2024/25 Budget year, borrowing over the next five years, the calculation of underlying debt, the £1.2trn that HM Treasury needs to raise from debt investors, and our conclusions on what the numbers mean for the public finances.

Key points highlighted in the report include:

Headlines

• Modest improvement in forecasts and small tax increases ‘pay for’ national insurance cut.
• Headroom of £9bn against the Chancellor’s primary fiscal rule is tiny compared with risks.
• End of low-cost borrowing is hampering investment in infrastructure and public services.
• Weak economy, high debt, demographic challenges, underperforming public services.
• No long-term fiscal strategy.

Key numbers

• Tax and other receipts of £1,139bn in 2024/25, equivalent to £1,375 per person per month.
• Public spending of £1,226bn in 2024/25, equivalent to £1,480 per person per month.
• Deficit projected to fall by a quarter to £87bn in 2024/25 and gradually to £39bn in 2028/29.
• Headline debt expected to reach £2.8trn by March 2025 and £3.0trn by March 2029.
• Underlying debt/GDP forecast to increase from 88.8% to 93.2% and then fall to 92.9%.

Conclusions

• Difficult choices on spending deferred until after the general election.
• Post-election tax increases likely, irrespective of who wins the general election.
• A badly designed fiscal rule driving poor decisions and unrealistic spending forecasts.
• Predicted reduction in the deficit to below 2% of GDP by 2027/28 is unlikely to occur.
• Further pre-election tax cuts could affect credibility with debt markets. 

Alison Ring OBE FCA, ICAEW Director for Public Sector and Taxation, is quoted in the Fiscal Insight as follows:

“The principal story of the Spring Budget has been how the Chancellor was able to find room for tax cuts while still meeting his fiscal targets to ‘bring down debt and the deficit’.

“This is a frustrating narrative as it misses the bigger picture of public finances that are on an unsustainable path, with little sign of a long-term fiscal strategy to address demographic change, growing balance sheet liabilities, underperforming public services, rising debt interest, or resilience against future economic shocks.

“Debt is high and projected to be even higher in five years’ time than it is today. ‘Headroom’ is tiny in context of trillions of pounds of tax receipts and public spending over the next five years and forecasts that don’t reflect government practice in freezing fuel duties nor likely spending increases from the now postponed Spending Review.

“And we have a fiscal target that discourages essential infrastructure investment while

at the same time never needing to be achieved as it is rolled forward each year.

“All of our fiscal eggs are now in a basket labelled ‘hope’ [for economic growth].”

For further coverage, including more detailed information about tax measures, visit our Spring Budget 2024 site by clicking here.