Budget 2024: What can we expect to see?
The Chancellor is due to deliver his Budget on 6 March 2024, less than four months after last year’s Autumn Statement. In what could be the last financial statement before a general election, Senior Campaigns and Public Affairs Officer, Eleanor Bateman, considers what the Chancellor’s plans might include as well as what the NRLA wants to see.
Next week’s Budget may be the last fiscal event before a general election, and the Chancellor will, more than ever, be hoping for a positive response to his announcements.
It is perhaps for this reason that, amidst the usual rumours and speculation, few specifics have been trailed and we remain somewhat in the dark on the detail.
As a reminder, just three and a half months ago, the Chancellor set out his Autumn Statement, touted as a 'statement for growth'.
Higher inflation provided some fiscal headroom, and the Chancellor decided to use most of this to pay for cuts to national insurance and corporation tax (via full expensing).
However, beleaguered public services were not compensated for the impact of higher inflation, meaning budgets have been stretched even further.
State of the economy
So, what has changed since then, and what will the Chancellor be hoping to achieve on 6 March?
At the start of his premiership, and in the wake of a disastrous ‘mini budget’, Rishi Sunak MP set out a series of pledges aimed to restore stability.
The first three of these were to halve inflation, grow the economy, and decrease debt.
Falling inflation, now at 4% as measured by the Consumer Price Index (CPI), means that spending on government debt is around £11 billion lower than forecast by the Office for Budget Responsibility (OBR) last November.
However to put this in perspective, borrowing is still more than double what was forecast back in March 2022.
More troublingly for the Government, gross domestic product (GDP) remained steadfastly low throughout 2023, and the UK entered a technical recession with a second consecutive decline in GDP at the end of 2023.
With GDP per capita lagging below 2019 levels, it is certainly not the backdrop the Chancellor would have hoped for.
Tax cuts to boost growth
But could things be looking up?
The Bank of England’s pessimistic economic growth forecast was recently adjusted, with growth of 0.5% in 2024 and 0.7% in 2025 now anticipated.
This may still look dire, but given GDP has stagnated for so long (it barely rose above zero in 2023) the outlook could be improving.
The Chancellor will likely want to emphasise this to justify his “stick to the plan” strategy, and more pro-growth measures are anticipated.
That said, estimates suggest that the headroom this time around will be between £15bn - £23bn, meaning that, while there is some scope for further tax cuts, they may not be as generous as those set out in the autumn.
The Institute for Fiscal Studies (IfS) recommends the Chancellor holds off on any significant tax cuts but suggests that a cut to Stamp Duty Land Tax (SDLT) could be “towards the front of the queue” if he is looking for growth-friendly policies.
As the NRLA’s Budget submission states, boosting housing supply is not only essential to meet growing need and demand, but it is an economic necessity.
A healthy private rented sector supports a flexible labour market and provides one of the best springboards into homeownership.
SDLT relief for first-time buyers was increased to £425,000 in 2022, with partial relief on purchases up to £625,000.
However, these thresholds are due to end in 2025 and there have been growing calls for the Government to make the changes permanent, and even to extend full relief to the upper cap to boost the housing market.
This, coupled with the introduction of 99% mortgages, which the Chancellor is reportedly considering, would certainly help households into homeownership, but could also be highly inflationary, particularly when overall housing supply remains depressed.
However, with the Chancellor stating his intention to “lighten the tax burden”, extending SDLT relief could well be within his sights.
What does the NRLA want to see?
The Government must look further than first time buyer’s relief, however, and reform other taxes in the private rented sector if it wants to boost economic growth.
Data suggests that landlords inject £3.6bn annually into local economies across the UK, and the Chancellor must be mindful of sustaining the vital role it plays to provide homes as well as employment in his decision-making.
Analysis by Capital Economics demonstrates that scrapping the higher rate of SDLT on additional property purchases alone could boost income and corporation tax receipts by £10bn over ten years and increase supply of private rented homes by 900,000 over the same period.
The NRLA is calling for the levy to be removed to incentivise investment and support the Government’s policy of homeownership, contrary to rationale when the levy was introduced.
While inflation has fallen and interest rates have (hopefully) peaked, housing finance and maintenance costs remain high and for many these are unsustainable.
The Chancellor can address this in part by reversing mortgage interest relief (MIR) changes to help maintain supply, with estimates suggesting that 110,000 fewer homes would be lost from the sector with full reinstatement of MIR.
This would benefit Treasury to the tune of £400m and dampen rent price inflation, which has been fuelled largely by increased costs.
In a Budget that could be pivotal for his party, the Chancellor will be considering how best to reduce government debt whilst growing the economy, and comprehensive reform of private rented sector taxes would be one of the best places to start.
