Beyond the fanfare surrounding Jeremy Hunt’s decision to cut the rate of national insurance contributions by 2p, a tax break worth around £450 to the average earner, there were some notable absences from the chancellor’s Budget.
Mr Hunt set out his stall to voters with the pre-election giveaway, as well as what he called a “long term plan for growth”.
Below, The Independent looks at which measures were not included in Mr Hunt’s Budget.
Cutting income tax
Ahead of Wednesday’s Budget, allies of Rishi Sunak had been clear the PM wanted Jeremy Hunt to unveil a politically potent cut to the basic rate of income tax.
After the chancellor’s November national insurance cut failed to shift the Tories’ dire poll ratings, the PM wanted a pre-election giveaway to win over disgruntled voters.
But, after being unable to find room within the government’s so-called fiscal rules, the chancellor did not change the income tax rate.
It raises the prospect of either an income tax cut in a financial statement before the next election, expected this autumn, or a manifesto pledge for the Conservatives to cut the basic rate of income tax.
Scrapping the tourist tax:
The chancellor has long-faced calls from the mayor of London, Tory backbenchers and business leaders to reinstate VAT-free shopping for overseas tourists.
Tourists from overseas were allowed to reclaim the 20 per cent VAT on their purchases in the UK until January 2021, when the tax break was scrapped by then-chancellor Rishi Sunak. Kwasi Kwarteng made moves to reintroduce the incentive in his September 2022 ‘mini-Budget’.
Jeremy Hunt quickly reversed the plan upon taking over as chancellor, claiming the decision would save the Government £2bn a year.
But critics have said the move proved a “hammer blow” to the tourism industry, with the Treasury also losing out more in lost tax income from wealthy overseas visitors.
But despite intense campaigning, Mr Hunt on Wednesday refused to reinstate the tax break.
Business rates reform:
Retailers up and down the country let out a fresh sigh of disappointment during Mr Hunt’s statement as he once again failed to deliver a “fundamental” review of the tax.
Business rates are charged on shops, pubs and other business properties based on their rental value.
And critics say the system unfairly punishes those with a physical presence in town centres, while online players face lower bills.
The government lowered business rates to give retailers a break in the autumn statement, and has made some changes to the system, but retailers are still waiting for the fundamental overhaul promised in 2019.
Labour has promised to replace business rates with a new, as yet undefined system.
VAT cut for hospitality:
Hospitality bosses had been calling out for a cut to the 20 per cent rate of VAT charged on pubs, bars and restaurants as the sector struggles to recover from the pandemic and the shock of spiralling energy bills.
The rate was cut to 5 per cent when Britain began to emerge from the first Covid lockdown in a bid to aid businesses’ recovery. It was later raised temporarily to 12.5 per cent but has now been hiked back to the usual 20 per cent level.
UK Hospitality chief executive Kate Nicholls warned ahead of Wednesday’s statement that firms were facing a “perfect storm” driving pubs, bars and restaurants into closure.
She called for the rate to be set back to 12.5 per cent to “help us keep prices low and get through what will be a temporary blip”.
But, in a boost for all businesses, Mr Hunt said the threshold at which firms pay VAT would rise from £85,000 of revenue to £90,000 from April 1.
Lifting the cap on Lifetime ISA (LISA) savings:
Personal finance guru Martin Lewis had raised expectations of a LISA win in the Budget, with the chancellor set to wipe a penalty for those using their savings to buy homes worth more than £450,000.
Mr Lewis has long campaigned for the government to scrap the penalty for first time buyers and to unfreeze the cap, which has not changed in line with house prices or inflation since it was launched in 2017.
Mr Hunt did not use Wednesday’s statement to scrap the penalty or increase the limit, as he had been reportedly planning. But he did announce a new British Isa which will allow an additional £5,000 of tax-free investment in UK businesses.
Equalising tax on electric car charging:
The chancellor did not heed calls from the House of Lords to slash VAT on public electric vehicle (VAT) charging.
The Lords’ environment and climate change committee had used a report to call for the rate to drop from 20 per cent to just 5 per cent, in a bid to make charging a car cheaper.
Owners of EVs pay the lower rate at home, but are hit with the 20 per cent VAT charge when charging in public places. It penalises those with no access to off-street parking and living in rented houses without charge points.
State pension reforms:
Jeremy Hunt had also faced calls to overhaul the state pension system, which the Institute for Fiscal Studies (IFS) has said will “add considerable pressure on public finances in coming decades”.
It suggested a shakeup including setting a new target level for the state pension and for the state pension only to rise as long as longevity at older ages increases, and never by the full amount longevity increases.
