Budget 2024 – live: Jeremy Hunt branded ‘fiscal drag queen’ in heated BBC clash as taxes up and income low

Jeremy Hunt overseeing return to austerity and falling living standards, Resolution Foundation warns, Archie Micthell reports.

Jeremy Hunt is overseeing the first fall in living standards between two elections in history and ushering in a new wave of austerity, the Resolution Foundation has warned.

The think tank said Mr Hunt’s Budget would force “implausible spending cuts” on whoever is chancellor after the next election.

And it highlighted Office for Budget Responsibility (OBR) figures showing wages, accounting for inflation, will only return to their 2008 levels in 2026.

The Resolution Foundation said it marked a “staggering near-two lost decades of pay growth” and that had pay continued on the pre-financial crisis path over this period, the average worker in 2023 would have been around £14,000 better off.

And it said between 2019 and the next general election, real household disposable income (RHDI) is set to fall by 0.9 per cent – the first parliament in modern history to see a fall in living standards.

Chief executive Torsten Bell said: “While tax and benefit strategies have been reversed, spending priorities have been rehashed. The £19 billion of cuts to unprotected public services after the next election are three-quarters the size of those delivered in the early 2010s. The idea that such cuts can be delivered in the face of already faltering public services is a fiscal fiction.

“Budgets are always a big day for Westminster, but the big picture for Britain has not changed at all. This remains a country where taxes are heading up not down, and one where incomes are stagnating.

“Big tax cuts may or may not affect the outcome of that election, but the task for whoever wins is huge. They will need to both wrestle with implausible spending cuts, and also restart sustained economic growth – the only route to end Britain’s stagnation.”

Jeremy Hunt’s Budget giveaways will result in about £20bn worth of cuts to public services, the Resolution Foundation (RF) has estimated.

The think tank branded the chancellor’s statement “fiscal fiction” and warned that “big cuts” were coming to public services after the general election.

James Smith, research director at RF, said the cuts would be “something like three quarters” of the intensity of that seen from 2010 under David Cameron’s coalition government.

“The government are pencilling overall day-to-day spending numbers beyond the end of the spending review, from 2025-26 onwards.

“And if you take out what the government has said it will guarantee in terms of health, defence, education, then you end up with those unprotected departments…. with really, really big cuts.

“So this is something like three quarters of the intensity of the the cuts that we got from 2010 and it’s getting on for £20bn. So you can think of tax cuts, the £20bn national insurance giveaway that we’ve had since autumn has been essentially funded by these fiscal fiction spending cuts that are pencilled in.”

On living standards, he said: “We don’t get back to the pre-2008 level of real wages until 2026. So that’s nearly two lost decades of real wage growth. So that’s an incredibly bleak backdrop in terms of living standards.

“If you look at overall income, this is going to be the first Parliament, which we have comparable income data for, where income is actually falling in real household disposable income terms.”

Rishi Sunak has been hit with a community notice on X/Twitter over a post about the spring Budget.

The prime minister posted a graphic showing how much a worker earning £35,000 would save from yesterday’s cut to national insurance.

Citing the OBR and Full Fact, the fact-checking website, X added a community notice to the post, pointing out that “because of freezes on tax levels the tax take from this Budget will actually be a net increase for those earning between £12,570 & around £29,000.”

Analysts also say those earning below £25,000 will not gain anything from the NI changes.

Jeremy Hunt insisted his Budget will make a difference to the scale of the challenges the UK is facing with creaking public services and struggling councils, saying it is part of a “long-term plan”.

Asked on BBC Radio 4’s Today programme whether the fiscal announcement has “come even close” to addressing such issues, the chancellor said: “I believe it has. If you want quick fixes, then I’m not your person.

“If you want a long-term plan to deliver better public services to get more investment into the economy, then I have delivered packages that do that.”

Jeremy Hunt and Amol Rajan clashed in a BBC Radio 4 Today interview this morning as the chancellor sought to defend his spring Budget.

Mr Rajan suggested to the chancellor that some had been referring to him as the “fiscal drag queen” after OBR forecasts revealed millions more people will be dragged into paying higher tax.

The chancellor, meanwhile, accused the journalist and presenter of giving a characterisation of the economy which is “unworthy of the BBC”.

Rajan said he was stating facts when the Chancellor objected after being told: “We’ve seen seven quarters of GDP per head that’s been revised downwards. We’re hooked on foreign labour. The birth rate is collapsing. Many public services are creaking. Councils are going bust. Those are facts.”

Mr Hunt replied: “I think the characterisation that you’ve just given of the British economy is unworthy of the BBC.”

As the two spoke over one another, Rajan said: “The BBC is an organisation with tens of thousands of people who do lots of different things.

Mr Hunt added: “I’m afraid I don’t share your pessimism.”

Jeremy Hunt must explain how he would fund abolishing national insurance contributions, the shadow chancellor has said.

Mr Hunt floated the idea in his spring Budget yesterday but did not set out a timeline for when he could implement the measure.

Rachel Reeves, Labour’s shadow chancellor, said doing so would cost £46bn and urged her opposite number to set out how he would pay for it.

She told BBC Breakfast: “Yesterday, at the end of the Budget, the chancellor started floating this idea that he was going to get rid of national insurance altogether.

“Well, that would cost £46bn . And I would like to know where that money is going to come from, because I just wouldn’t make a promise like that without being able to say where the money is going to come from.

“I think it is incumbent on politicians to be honest about the trade offs that have to be made.”

Jeremy Hunt insisted the government has done an “enormous amount for pensioners” and “really prioritised pensioners” amid criticism over the decision to cut national insurance rather than income tax in the spring Budget.

The chancellor said that, ultimately, growing the economy will help increase the state pension.

He told Sky News: “We’ve done an enormous amount for pensioners. This government introduced the triple lock… we have really prioritised pensioners.”

Jeremy Hunt has said he is not currently planning for another fiscal event before the general election.

Asked whether he was planning another fiscal event before the election, Mr Hunt told Times Radio: “No, but if there’s an autumn election which is the working assumption then theoretically it would be possible to have one.

“But you know, that’s a decision that’s above my pay grade.”

Jeremy Hunt conceded he was “not pretending” he had brought “all those taxes down” when asked about fiscal drag, whereby people are pulled into higher rates while thresholds are frozen.

The chancellor also said removing national insurance altogether would be a “huge job” and suggested it would not happen “any time soon” but that he wants to “end the unfairness” of the system.

He told Times Radio: “Freezing the thresholds is one of the ways in which taxes have gone up in order to pay for the jobs we protected during Covid, to help… families paying their electricity over last winter, all those other very important things.

“And I’m not pretending that I brought all those taxes down in one go. We can’t afford to do that. It wouldn’t be responsible to do that. But do I want to carry on bringing them down, as I did yesterday, as I did in the autumn statement? Yes, I do.”