In a Budget that sets the scene for an imminent general election, Chancellor Jeremy Hunt has announced a headlining cut to National Insurance, and boosts to benefits and the state pension. However, the average person in the UK can still expect a drop in living standards. A lack of bold new measures to help the UK’s transition to net zero has also failed to impress climate experts.
Here’s what the Budget is likely to mean for your personal finances and the environment.
National Insurance is cut
The chancellor announced a cut to National Insurance (NI) by two per cent for 27 million people. Workers earning up to £50,200 currently pay 12 per cent in NI, so will now pay 10 per cent. Hunt says this will save somebody on the nation’s average salary of £35,000 more than £450 a year.
Importantly, the change only partially offsets the fact that NI and income tax bands are already frozen until 2028. This means that any pay rise could drag you into a higher tax bracket, or have a greater proportion of your income taxed than would otherwise be expected. It’s estimated that the freeze will result in nearly four million more workers paying income tax, and around three million moving into the higher rate.
Benefits are up and crackdown for some
Benefits are to rise by 6.7 per cent next year, in line with the inflation rate for September. This will see 5.5 million households on Universal Credit gaining £470 on average in 2024-25, according to the Treasury. However, welfare recipients will be made to undertake a mandatory work placement if they are still looking for a job after 18 months.
Minimum wage is up
The national living wage for over 23s will rise to £11.44 an hour, up from £10.42. Those aged 21 or 22 will get £11.44 an hour, up from £10.18 an hour. For 18 to 20-year-olds, the minimum wage will rise from £7.49 to £8.60 an hour.
Tax breaks for businesses
The government is making permanent a tax break for businesses which allows them to offset investment in machinery, IT and equipment against corporation tax. It is also extending business rate relief for many small firms, including pubs and other hospitality businesses.
Changes to ISA rules
Savers will be able to pay into multiple ISAs of the same type in one year and transfers between providers will be made easier.
Good news if you claim a state pension
The state pension will increase by 8.5 per cent next year, in line with average earnings. It will reach £221 a week from April 2024.
It will be more expensive to smoke, but not to drink
Tobacco duty has been put up by 10 per cent, while alcohol taxes have been frozen until 1 August.
Nothing said of cost-of-living payments
There was no mention of cost-of-living payments, which have provided a lifeline for many people on low incomes. There is another payment for pensioners this winter, and one for low-income people on benefits in the spring.
An overall drop in living standards
Ultimately, the Office for Budget Responsibility says living standards, as measured by real household disposable income per person, are forecast to be 3.5 per cent lower in 2024-25 than their pre-pandemic level. This is the largest reduction in real living standards since official records began in the 1950s.
What about the environment?
‘Small-scale’ support for green projects
Jeremy Hunt announced £960 million of investment into a new green energy growth accelerator, or GIGA. This will be used to fund offshore wind, nuclear, carbon capture, and hydrogen projects across the UK. However, industry experts are not convinced that the amount shows a real commitment to green investment.
Louisiana Salge, Head of Sustainability at EQ Investors said: “It’s a shame to see that the government has again passed on an opportunity to ambitiously support the UK’s delivery on net zero commitments. This announcement seems to constitute a small-scale support programme for early innovation, vastly different from the scale and momentum we have seen in the US and some of Europe.
“That scale is necessary to attract private investments and deliver a material impact on driving accelerated decarbonisation in line with the Paris Agreement.’
James Alexander, chief executive at UKSIF, agreed that the announcements do not put the UK on track with green industries across the world. He said: “The size and scale of commitments made today still fall short of a sufficiently comprehensive response to the US Inflation Reduction Act, the EU’s Green Deal Industrial Plan, and similar initiatives in other jurisdictions.”
£10k sweetener for those living near new energy generators
The government will offer £10,000 off electricity bills over 10 years to those who live nearby new energy transmission infrastructure.
Dominic Rowles, lead ESG analyst at Hargreaves Lansdown, said: “It’s hoped this plan will speed up planning approvals for new infrastructure projects, which have been beset with delays and increased costs in recent years.”