Chancellor Jeremey Hunt’s Spring 2023 Budget has a focus on retaining workforce and his four ‘E’s – Enterprise, Employment, Education and Everywhere. Mr Hunt himself calls this his ‘back to work’ budget. Here we examine what that means.
Spring 2023 Budget Review
Mr Hunt says that by the end of the forecast period, the government’s current budget deficit will be in surplus. He says the OBR is expecting that he will meet his fiscal rule of keeping public sector net borrowing is now expected to hit a lower peak than expected. Forecast at 97.3%, falling to 94.6% by 2027-28.
Corporation Tax will rise from 19% to 25% in April for businesses with taxable profits over £250,000. This measure was first announced by Rishi Sunak. Hunt defends the rise against opposition, saying it still leaves the UK with the lowest headline corporation tax rate in the G7. Businesses with profits between £50,000 and £250,000 will pay between 19% and 25%. Mr Hunt announced a new £9bn policy of “full capital expensing”, for the next three years initially. This he claims will allow businesses to write off all investments against their tax bills. He also announced a new “enhanced credit” for research-intensive businesses, worth £27 for every £100 invested. He even offers an annual £1m prize for the most innovative research in AI, spanning the next 10 years. He says he has streamlined regulations for international trading, meaning there will be less paperwork for international traders plus more time allowed to submit customs forms. Businesses will be able to deduct investment in new machinery and technology to lower their taxable profits. Most businesses currently get this relief through the annual investment allowance. He claims tax reliefs will benefit 12 new Investment Zones across the UK, funded by £80m each over the next five years. With these measures the chancellor says his aim is to create, “the most pro-business, pro-enterprise tax regime anywhere”. He also says he will put in place a new medicine regulator. This aims to give “rapid, often near-automatic approval for medicines and technologies already approved by trusted regulators in other parts of the world such as the US, Europe and Japan.
Mr Hunt has taken steps to reinvigorate the workforce with measures that he explains will coax retirees back into work to fill the large number of vacancies. One such measure aimed at encouraging the over 50’s back into work is the annual pension savings allowance increase from £40k to £60k and removing the lifetime allowance cap for tax-free pension savings. It is widely believed that this in fact aimed more directly at higher paid NHS consultants who have stepped away from their profession following the pressures of covid. However there will also be a new apprenticeship called “returnerships”, for over-50s to return to work in a different sector. Mr Hunt has scrapped the unpopular work capability assessment, with more details around how this will unfold to be announced. The chancellor has introduced a new voluntary employment scheme for people experiencing disability. This aims to support disabled people to enter paid work without the risk of losing their disability benefits. He has also announced a £400m scheme to help support mental and physical health for workers. Mr Hunt says that for people receiving universal credit sanctions will be “applied more rigorously” to force claimants to search for work, saying, “independence is always better than dependence.”
The chancellor’s education reforms predominantly refer to childcare. Namely funds and changes to the system that make it easier for new childcare professionals to qualify and adjustments to the ratio of childcare professionals and how many children they can be responsible for. These measures intend to encourage parents of young children into the workforce, particularly enabling parents receiving universal credit to return to work, or to increase the hours they can work. People who receive universal credit will be able to receive childcare funding upfront, instead of in arrears, and the amount available will increase. The headline to this is the extension of ‘free childcare’ to working families with children aged between 9 months and two years old. This will be phased in, beginning with 15 hours free for two-year-olds from April 2024 and the total 30 hours being available by September 2025.
Energy bills were due to rise from £2500 to £3000 in April. Now the Energy Price Guarantee (EPG) of £2500 will be extended until July. This is largely due to higher tax revenues and a slight fall in the cost of energy. Now when the EPG comes to an end, energy prices are expected to fall to £2000. As expected, Hunt has extended the 5p cut to fuel duty for a further year, originally introduced by Rishi Sunak last March. He announced help for customers paying via a prepayment meter, to “bring their charges in line with comparable direct debit charges”. He also announced a £63m fund to help leisure centres and pools with energy costs and £100m extra for charities facing soaring costs. The chancellor announced £20bn of investment in carbon capture and storage. He says nuclear power will be classed as environmentally sustainable, which will make it eligible for investment incentives. Hunt also announces the creation of what he calls Great British Nuclear. He says this initiative will help to bring down energy costs.
This represents the policy formerly known as Levelling Up. This includes the creation of 12 new investment zones in areas such as the West Midlands, Greater Manchester and Liverpool. Mr Hunt also announced £400m for “levelling up partnerships” in areas including Redcar and Cleveland and Rochdale, plus confirming the next round of city region transport settlements, worth £8.8bn over five years. Mr Hunt hopes to raise morale with a £200 million fund towards pothole repairs and “draught relief”, meaning a reduction in tax on alcoholic products sold on draught in venues such as pubs. He calls this a “Brexit pubs guarantee.”
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