Spring Budget 2024_GK Strategy
The GK team react to the Chancellor’s Spring Budget, with GK Strategic Advisers offering their insight into what this means for the Conservative Party in the run up to the General Election, what the budget means for individuals, as well as the announcement’s wider impact on key British industries.
To read our briefing please use the link above or click here.
GK Associate Hugo Tuckett reviews GK Strategy’s Private Equity Breakfast, where the Spring Budget and the general election were key discussion topics.
Will Jeremy Hunt use the Budget to put Labour on the back foot?
On Tuesday 27 February, GK Strategy was delighted to host professionals across private equity, corporate finance and wider deal advisory at a panel event to discuss what we can expect in politics over the next 12 months. The panel included The Rt Hon. David Laws, former Chief Secretary to the Treasury, and Chris Giles, Economics Commentator at The Financial Times. The discussion was chaired by GK’s CEO, Louise Allen.
A key theme of the discussion was the Government’s priorities for the upcoming Budget. The panellists agreed that challenges within the UK’s public finances would limit the Chancellor’s flexibility to implement wide-ranging tax cuts in the months leading up to the General Election.
Instead, they argued that the Government would prioritise smaller, targeted tax cuts that would create a dividing line with Labour. A reduction or phasing out of inheritance tax was touted as the one area where the main opposition party would struggle to match the Conservatives.
Labour’s immediate fiscal priorities, should it win the upcoming General Election, were also addressed by the panel. David Laws suggested that the Shadow Chancellor, Rachel Reeves, would have to decide whether to follow Gordon Brown’s approach post-1997 and commit to a Conservative government’s tight spending plans, or as was the case post-2010, label the previous administration financially irresponsible and introduce a series of tax rises and spending cuts to balance the books.
He later suggested that the Chancellor, Jeremy Hunt, might try to use the next few months to lay a series of traps for Labour, such as a commitment to reduce income tax in April 2025, in an attempt to create some separation between the two parties ahead of polling day.
Please get in touch via (hugo@gkstrategy.com) if you are interested in attending future events or would like to set up a call to discuss the year ahead in politics.
GK Associate, Joshua Owolabi, assesses Rishi Sunak and Keir Stramer’s recent struggles with rogue MPs.
Internal strife muddying the waters for both the Conservatives and Labour
Former Prime Minister, Harold Wilson, joked frequently about the frenetic pace at which politics could move. Over his long career, he became well-acquainted with the turbulence that intra-party politicking could bring. Keir Starmer and Rishi Sunak may be able to relate. Clearly, the last few weeks have been taxing for them both as they struggle to deal with internal conflicts.
There has been scant opportunity for Starmer to enjoy the emphatic byelection result in Wellingborough, where the Labour Party overturned a Conservative majority of over 18,000 votes. It doesn’t matter that only a fortnight ago Starmer led his party to its largest swing in a byelection since 1994. Since then, the Labour Party has needed to clamp down on grassroots dissent over the decision to withdraw support for its Rochdale byelection candidate, Azhar Ali. Days later, Starmer was scrambling to avoid a rebellion and the potential resignation of Shadow Ministers, after the SNP brought forward an opposition day motion on the war in Gaza.
The Prime Minister has been blindsided yet again by some of the more outspoken Tory MPs. Lee Anderson, who had been Deputy Chairman of the Conservative Party as recently as January, had the whip suspended following his incendiary remarks about the Mayor of London. Various Tory MPs have either defended or criticised Anderson since his outburst. Sunak has attempted to placate both sides, calling Anderson’s comments ‘wrong’ while also refusing to label them as ‘Islamophobic’.
However, Anderson doubling down on the comments has left Sunak with a problem to solve. Can he deal with the Anderson situation in a way that keeps the right-wing of his party happy, but also heeds the calls from ‘One Nation’ MPs for Anderson to be disciplined? Unfortunately for the Prime Minister, the answer to that question seems obvious.
Meanwhile. a speech from Sunak’s predecessor elicited the response “err… who is Liz Truss?” from a perplexed American audience at a conservative political conference in Maryland. Despite the criticism that Truss’ speech has received, Sunak will be concerned by her decision to lean into conspiracy theories about the ‘deep state’ and her call for Nigel Farage to rejoin the Party. Along with the Lee Anderson headlines, it highlights the way in which Sunak is struggling to control the narrative.
As Tory factions battle each other for control after the election and the Labour leadership works to limit self-inflicted wounds before it, the approaching Spring Budget hasn’t received much attention. Sunak, Starmer, Hunt and Reeves will need their MPs to get back on message as they set out their economic visions. They’ll be hoping that the infighting of February gives way to a renewed focus on policy in March.
GK Adviser Rebecca McMahon assesses the potential impact of the Horizon scandal on the Labour Party’s procurement plans.
How will the Horizon Scandal influence Labour policy?
The renewed focus on the Post Office’s procurement of Fujitsu’s Horizon software has brought to light procurement issues which are pertinent to the Labour Party.
Labour has already committed to increasing oversight of government procurement – Shadow Chancellor, Rachel Reeves has proposed a “covid corruption commissioner” watchdog to recover taxpayer money lost due to the Government’s VIP “fast lane” for contract delivery during the pandemic. Evidently, the Party is keen on a system where both the Government and individual suppliers are held to greater account. The Horizon scandal only adds to its case.
The Party is not just set on preventing bad outcomes from government procurement; they are also aiming to use it as an actively positive instrument, with Deputy Leader Angela Rayner placing an emphasis on “social and environmental factors”.
She also urged the Government to ensure that “contracts do not always automatically go offshore” and instead are awarded “to businesses creating local jobs, skills and training”. Labour has also said it would “make social value mandatory in public contract design”, introducing measures to promote “decent work” and strengthen supply chains.
Labour to lean on procurement to digitalise services?
As well as encouraging more ethical procurement, Labour is also keen to use procurement to further digitalise public services. This is especially true of the NHS, where key figures like Wes Streeting, Shadow Health Secretary, have been vocal about the need to invest in innovative health technologies and make more effective use of health data.
However, in the wake of the Horizon controversy, any efforts to radically digitalise the NHS will be caveated by important questions about accountability.
Whether or not digitalisation will be a quick fix for the UK’s declining health provision, it is likely to be a key area for procurement under a Labour government. UK healthtech has expanded nine-fold since 2016, and the sector’s future could be bright under a future Starmer government.
GK Adviser Felix Griffin assesses the potential battle lines between Labour and the Conservatives in the early years sector ahead of the General Election.
A Political Football in the Education Arena
In the ever-evolving education landscape, early years policy has found itself thrust into the centre of a complex and highly contested arena. Incrementally, the situation has worsened over the years, with the ‘cost of living’ crisis and systemic staff recruitment and retention issues taking their toll. Early years policy is now a political football, bouncing between competing ideologies and vested interests.
There are now clear division lines between Labour and the Conservatives. Labour appears staunchly focused on prioritising comprehensive child development, emphasising a holistic and nurturing approach to early education. On the other side, the Conservatives have pivoted towards viewing the early years as a means of getting parents back to work, shaping their policies with a lens primarily focused on economic productivity.
With the Conservatives using free childcare as a ‘vote winner’, as previous governments have done, there is concern that the implementation failures that have plagued the sector for so long will persist.
As the prospect of Labour taking the reins becomes increasingly likely, it stands at a crossroad. The Party is confronted with the pressing decision of whether to persist with a clearly broken framework, risking further erosion of the quality of early childhood education, or opting for the challenging path of withdrawing the current ‘free childcare’ system, potentially facing backlash from parents and stakeholders.
However, amidst this dilemma, there is a transformative opportunity – to reform the existing system comprehensively. By engaging in strategic overhauls and policy adjustments, informed by its ‘major’ review of the early years sector, Labour has the chance to steer the course towards a more effective, equitable, and responsive early years education system, ensuring a brighter future for the nation’s youngest minds.
GK Associate Hugo Tuckett assesses the recent student visa reforms, and what they mean for the higher education sector.
With the Government continuing to struggle in the polls, Rishi Sunak has launched a full-frontal assault on the immigration system aimed at bringing numbers down and cutting into Labour’s seemingly unassailable lead.
Following a record net migration figure of 745,000 in 2022, the Government has undertaken a series of measures to tighten the UK’s immigration system. As they are the largest group of non-EU migrants, international students have come into the firing line.
In May 2023, the Government introduced new restrictions to student visa routes by preventing international students from bringing family members on all but post-graduate research routes, as well as banning people from switching into work routes until their studies have been completed. These measures officially came into force on 1 January 2024.
The Government expects this to result in an estimated 140,000 fewer people arriving in the UK. However, with years of frozen domestic tuition fees and reductions to teaching grants stemming from Britain’s exit from the EU, it is unclear whether the UK will retain its attractiveness to international students, the very group who have been covering the sector’s budgetary shortfalls.
Notably, the Government’s own impact assessment refuses to consider the effects of preventing international students from bringing dependants on all but post-graduate research routes, given the lack of available evidence to determine how many students (who bring dependants) will be dissuaded. On a more positive note, the impact assessment finds that only 2% of total students with an expired student visa would be affected by the ban on switching work routes until their studies had been completed.
Given the distinct possibility that numbers of international students arriving in the UK drop because of the changes, financial pressure will grow on higher education providers who have made over-optimistic assumptions about future growth in international student numbers as a means of balancing the books.
As we enter an election year in which the Conservatives will be reluctant to loosen immigration controls, the likelihood that some providers collapse under the financial strain cannot be overlooked.