Against a difficult fiscal backdrop, the Chancellor aims to strike a balance, providing support for businesses and technology adoption as well as tax cuts ahead of the election.
With an election due within the next year the Chancellor presented his Spring Budget 2024 with an eye on the electorate. The majority of proposals were designed to support those hardest hits by the rise in the cost in living as well as freezing alcohol and fuel duties that impact a wide range of consumers.
A further 2% cut to National Insurance, building on the already announced 2% cut announced in the Autumm Statement aimed to provide a further boost for the public ahead of an election.
This cut to National Insurance was paid for through a new vape levy and rise in tobacco duty, extending the UK's windfall tax on the profits of oil and gas companies until 2029, changes to ‘non-dom' status and a range of other small tax rises.
What did the budget tell us about the economic outlook for the UK:
The Office for Budget Responsibility (OBR) set out that the Chancellor will continue to meet his fiscal rules, with the national debt falling at the end of the forecasted period
There were some positive signs in business investment, with the OBR showing business investment rose by 6.1%, faster than predicted in the Autumn.
However, the outlook for the British economy remains sluggish. The economy entered a technical recession at the beginning of 2024 and the OBR has not significantly revised up its growth forecasts from the Autumn.
There was positive news for inflation, which is set to fall to the Bank of England's 2% target in Q2 of 2024.
What announcements were there for the tech sector?
A new approach to public sector spending with a focus on new technology and productivity: the Government is broadly maintaining existing levels of public spending. However, the Chancellor announced a new public spending productivity plan.
The largest feature of this was fully funding the NHS productivity plan with an additional £2.5bn, as well as changing how the Treasury reviews spending decisions. Making it easier for Government Departments allocate investments in projects that will improve the productivity of public services.
Investment in tech clusters across the UK: The Chancellor announced a range of ‘levelling-up' investments aimed at supporting high tech clusters across the country, these included investment in the SaxaVord Spaceport in Scotland, financing for new homes and a health tech cluster in Canary Wharf and a long-term funding settlement for the development of Cambridge.
Addressing concerns with HMRC and the R&D tax credit: responding to concerns raised about how the R&D tax credit is being implemented with a rise in claw backs against SMEs the Treasury has said HMRC will establish an expert advisory panel to support the administration of the R&D tax reliefs. The panel will provide insights into the cutting-edge R&D occurring across key sectors such as tech and life sciences, and review relevant guidance, ensuring it remains up to date and provides clarity to claimants
Full expensing to be extended to leased assets: this builds on a welcome capital investment relief announced at the previous budget. By extending full expensing this will allow businesses to deduct the full cost of eligible IT equipment, plant, and machinery in the year they are purchased or leased, helping businesses invest in new capital. The full expensing scheme has significantly improved the competitiveness of the UK's capital incentives and this extension to leased assets is welcome.
Financial and savings reforms to boost investment in high growth companies: the Chancellor announced a range of measures to build on the Government's plans to encourage more investment into high growth sectors such as the tech sector. British institutional investors, such as pension funds, and savers across the UK will be encouraged to invest in domestic companies through new transparency measures and a new UK ISA will support savers and open up UK retail investment opportunities for individuals. The UK ISA will be a £5,000 allowance in addition to the existing ISA allowance. Providing a new tax-free product for people to invest in UK-focused assets.
Additionally, the winners of the Long-Term Investment for Technology and Science (LIFTS) competition we announced as Schroders and Intermediate Capital Group (ICG).
Reversal on Angel Investment rules: the Treasury has listened to campaigners from the start-up community and an InvestHER campaign, confirming it will reverse plans to raise the income and net asset thresholds to qualify as an Angel Investor.
Updates on compute: The Government has announced over £1.5 billion of planned investment in public compute. The Spring Budget did not announce new money but set out that late in the year details will be provided on how both researchers and innovative companies will be able to access to these investments.
Digital adoption and upskilling: a £7.4 million AI upskilling fund pilot was announced to help SMEs develop AI skills. This funding will complement the SME Digital Adoption Taskforce, which the government will shortly be launching. The taskforce will investigate how best to support the adoption of digital technology by SMEs to boost their productivity.
Accelerating smart data schemes, energy and transport: the government is providing targeted funding for consultations and calls for evidence to accelerate schemes in energy and transport.
Revised Growth Duty and new performance framework: the government will extend the Growth Duty to Ofwat, Ofcom and Ofgem and publish refreshed guidance on the Growth Duty. The government will also publish a Regulator Performance Framework in the coming months that will encourage greater regulator agility, efficiency and responsiveness.
Additional Funding for the Alan Turing Institute: the Alan Turing Institute has been granted up to £100 million in funding for the Institute over the next five years. techUK and our members will be interested to understand how this significant investment will be allocated.
The full Spring Budget 2024 documents can be read here.
Responding to the Chancellor's Spring Budget, techUK CEO Julian David said:
This Budget builds on a number of positive policy choices made by the Government over the past year. A new plan to boost productivity in the NHS and across public services will deliver a much-needed injection of funds for digitisation, resulting in a better service for the public.
Additional steps to review how HMRC is administering the R&D tax credit, giving clarity on how new public compute investments will be accessed and new funding to encourage digital and AI adoption will also be welcome.