Spring Budget 2024 announces further two percentage point NICs cut and £3.4 billion NHS IT investment

The Spring Budget 2024, announced on 6 March 2024, included a further two percentage point cut in National Insurance Contributions (NICs) and a £3.4 billion investment in modernising NHS IT systems¹. The National Institute of Economic and Social Research (NIESR), an independent research body, published its response the same day, describing the budget as "a low-key budget that is unlikely to unlock the UK's growth and productivity problems"¹.

NIESR said the NIC cut is regressive, with households in the lowest income decile set to gain 0.2 per cent of their annual disposable income, while the top five decile gain 1.4 per cent¹. It added that measures such as the NIC cut will not boost living standards significantly, which for the bottom 10 per cent of households are some 20 per cent lower relative to pre-pandemic levels¹.

On public services, NIESR said the productivity plans, including the £3.4 billion NHS IT investment and the commitment to growth in "day-to-day" public spending of one per cent in real terms, are moves in the right direction, but the budget lacks a plan for the longer-term funding of non-ringfenced departmental spending such as policing, the justice system and local government funding¹. It noted that local authorities are spending around 15 per cent of their budgets simply servicing their existing debt, and that without further support, or any reforms to regressive Council Tax, the provision of critical public services on which the most vulnerable people depend will be compromised¹.

NIESR also said the government's continued commitment to Levelling Up is welcome, including announcements of further funding and more devolution deals, but the scale is insufficient and the allocation has been too low and patchy to close the gap between the top performing and worst performing areas, which is at the heart of the 12 Levelling Up missions¹.

Why it matters for households

The NIC cut takes effect as a change to the rate employees and the self-employed pay on earnings, and NIESR's analysis indicates the cash gain rises with income: 0.2 per cent of annual disposable income for the lowest income decile against 1.4 per cent for the top five decile¹. For households in the bottom 10 per cent, living standards remain some 20 per cent lower than before the pandemic, according to NIESR¹. The budget's public service measures affect the funding available for non-ringfenced areas including policing, the justice system and local government, where NIESR says around 15 per cent of council budgets go on servicing existing debt¹. The tax changes and public spending plans therefore affect both take-home pay and the services households rely on.

What happens next

The sources do not set out a timetable for the NIC cut or the NHS IT investment beyond the budget date of 6 March 2024¹. NIESR's response does not report dated next steps for the funding of non-ringfenced departmental spending, local government support or the Levelling Up missions¹.