Spring Budget 2025

On 30 October 2024, everyone waited with bated breath for the first Labour Budget in almost 15 years. As it materialised, it was quite the event, with the Chancellor increasing taxation to record levels and placing most of the burden on business.  The majority of the increased taxes are yet to manifest themselves as National Insurance increases, reduction to NI reliefs and increases in minimum wage aren’t due to ‘kick-in’ until April 2025.  Debt markets reacted badly, increasing the cost of borrowing for Government; Business was up in arms having to carry the £40bn increase in taxation; General confidence has ebbed away as demonstrated by S&P’s Global UK Manufacturing PMI index in January 2025 pointing towards continuing decline.

Overall, the Autumn Budget was considered negatively but even before these taxes are implemented, we are onto the Spring Budget.

The Spring Budget is a generally quieter affair, more focused on performance updates rather than any material changes to fiscal policy.  The Office for Budget Responsibility (OBR) will update on general UK performance and most likely the elimination of the £10bn buffer that the Chancellor repeatedly quoted, as the cost of borrowing has increased materially.  UK GDP growth is likely to be pretty much nil.  It’s still early days but the declaration that economic growth is the number one mission for government is sounding a little hollow.

The Chancellor, like her predecessors, has made the commitment to golden rules being:

• Not to borrow to fund day-to-day public spending
• To get debt falling as a share of national income by the end of the parliament

Like her predecessors, hard rules often come back to bite, and both of these fiscal rules will be under immediate pressure.

From Heligan’s perspective, we expect Defence Spending increases to be a pivotal part of the Spring Budget.  The ongoing ‘Trumpism’ of the Ukraine-Russia conflict is creating greater uncertainty as to an ultimate outcome but what is assured is that Europe needs to be bearing an increasing commitment for its own National Security and not rely upon US support as it so often has since the ending of WW2. 

We welcome the declared increase in GDP spending to 2.5% but believe that this should go further towards 3.0% to fund innovation in technologies that can be used to keep our country safe, as well as recruiting more heavily to maintain and ultimately grow the size of armed forces. At Heligan we disagree with the Chancellor and believe the number one mission for government is keeping the nation safe!