The Chancellor, Jeremy Hunt is due to present his Spring Budget in the House of Commons on 15 March. But what changes can we expect him to announce?
What to Expect in the Spring Budget 2023
This will be Mr Hunt’s second fiscal policy proposal since he became Chancellor. It follows November’s Autumn Statement, which announced changes to tackle inflation and settle the markets after the controversial mini-budget from former Chancellor Kwasi Kwarteng. Although we cannot be certain until the day, here we look at some of the budget expectations, according to forecasters.
The Spring Budget
The Spring Budget is when the Chancellor is to provide an update to parliament as well as the public about the health of the UK’s economy since the Autumn Statement in November, plus announce any further economic plans. While this is an opportunity to announce changes to economic planning, the Spring Budget does not traditionally herald major shifts in policy. Hunt has already said that this will be a ‘slimmed-down’ fiscal plan.
No Further Tax Cuts
Mr Hunt has reportedly ruled out any further tax cuts since the Autumn Statement. However Mrt Hunt may set out plans for future tax cuts, with optimism that the recession will be less severe than predicted.
5p Fuel Duty Cut Continuation
Fuel duty on petrol and diesel was cut by 5p a litre last spring, to ease surging fuel prices. This 5p cut was due to end in March 2023, but it is thought that the Chancellor could announce that this will continue for a further year.
Energy Cap Rise
The Energy Price Guarantee (EPG) was due to end in April 2023. It was announced in the Autumn Statement that an updated version will run for an extra 12 months. However, this cap will then increase to £3,000 per year.
Cost of Living
Cost of living payments already planned to run until 2024 will remain. £900 for those on means-tested benefits, £300 for pensioners, and £150 for individuals on disability benefit. Despite calls for extra support, Hunt says there is not ‘headroom to make a major new initiative to help people’. He said: ‘We always look at what else we can do. But we also have to be responsible with public finances, because if we’re not, we’ll just see interest rates go up, and people will face a different kind of cost, and that’s why we have to get that balance right.’
Pensions Lifetime Allowance
It is predicted that Jeremy Hunt will increase the lifetime allowance (LTA) for pensions to help encourage over-50s back into work. He is hopeful that those who retired early after the pandemic or haven’t found the right role after furlough, could be enticed back into the workforce. The lifetime allowance is the limit on how much you can save in your pension before becoming eligible for a tax charge.
Potential Early State Pension Age Rise
Further to the LTA, the Chancellor may change the age at which retirees can access their state pension, currently set at 66 for both men and women. It’s due to gradually increase to 67 by 2028, before slowly going up to 68 between 2044 and 2046. A review into the state pension age recommended the increase to 68 be moved forward to the mid-2030s, and that this change could be announced in the Spring Budget.
Expansion of free childcare
Free childcare support could be extended to parents of children under two years old. Currently, all children aged three and four are entitled to either 15 or 30 hours of free childcare from a registered provider. Provision for two-year-olds is currently limited to 15 free hours a week for those whose parents claim certain benefits. New plans are being considered to extend the free 30-hours-a-week entitlement to children aged between nine months and three years. This is to help parents get back to work. Also being considered is adjusting the ratios for childcare providers to allow adults to look after more children, reducing the Universal Credit taper rate and making it easier for new childminders to register in the profession.
The UK government calculated an unexpected budget surplus of £5.4bn in January, due to record self-assessment tax payments received by HMRC. According to the ONS, income tax raised via self-assessment rose by 33% year-on-year to a record £21.9bn in January 2023. This is certainly cause for optimism although the Treasury will be cautious not to over estimate growth based on a short term rise. Mr Hunt says his priority is reducing the national deficit, which he says is still at the highest level since the 1960s.
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