Chancellor announces 2023 Spring Budget

Listen to this article here

Chancellor of the Exchequer Jeremy Hunt has delivered his 2023 Spring Budget, setting out plans for levelling up all parts of the UK and restoring growth to the UK economy.

The Chancellor’s first Budget since taking on the role in October 2022 comes against a backdrop of slow economic growth, high inflation and increasing pressure on household finances.

Addressing the House of Commons, Jeremy Hunt introduced his Budget with the latest economic figures from the Office of Budget Responsibility (OBR). He shared that OBR forecasts would see the economy avoid a technical recession (defined as two consecutive quarters of negative growth) in 2023, an upgrade of previous estimates made last year.

Levelling Up and devolution

The Chancellor confirmed plans, leaked earlier this week to the Times, for Greater Manchester and the West Midlands mayoral combined authorities to have greater control over local spending in an expansion of devolution arrangements. The two city-regions will receive direct funding settlements (removing the need for Whitehall approval), devolution of post-19 skills funding and functions, and greater control of the affordable homes programme, and will pave the way for future devolution arrangements for other parts of England.

Levelling up projects in the North West worth around £58 million in total were also approved in the Budget, including funding for Stockport Council for a new community hub in Marple, funding for which came from unallocated departmental budgets after missing out on the latest Levelling Up Fund allocation.

Greater Manchester was also among eight regions to be selected to develop Investment Zones, which will receive up to £80 million each over five years (including tax incentives) to drive growth through links with local universities and researchers.

Cost of living

The Chancellor confirmed that the Energy Price Guarantee for household energy customers, due to rise to £3,000 in April, will now remain fixed at £2,500 for the next three months when Ofgem’s Energy Price Cap is set to fall further. The poorest households will also continue to receive additional support with energy bills. With the exception of pools and leisure centres, no extension to support for businesses with their energy costs has been announced.

Working parents are also set to benefit from reduced childcare costs, currently among the highest in the world. Eligible working parents will get the equivalent of 30 hours free childcare each week for children aged from nine months through to the start of school; plans will not be fully implemented until September 2025. The move is anticipated to help boost economic output by removing a major financial barrier to parents returning to work.

Taxation

While inflationary increases to alcohol duty are set to come into effect later this year, the Chancellor has announced a Draught Relief of 11p for draught products sold in pubs, reducing the duty paid compared to the same product bought in a supermarket or off-license.

Fuel Duty has also been frozen for a further 12 months in light of continued high inflation, and is expected to save motorists around £100 a year.

A rise in Corporation Tax from 19% to 25% will continue to go ahead from April, however, the Chancellor anticipates only 10% of businesses will pay the full rate. In a bid to drive up productivity and investment by businesses in the UK, Jeremy Hunt set out plans to introduce a new policy of “full expensing” for the next three years allowing every pound spent on IT equipment, plant or machinery to be deducted in full and from profits. The Annual Investment Allowance for small businesses has also been increased to £1 million, as well as an enhanced credit for small businesses where R&D costs represent over 40% of spending.

Pensions

The Chancellor has increased the pensions annual tax-free allowance by 50%, allowing those saving for retirement to put away up to £60,000 each year tax free. The Lifetime Allowance of £1 million has also been abolished entirely. It is hoped the move would help mitigate staffing problems in highly paid sectors where older workers, particularly experienced NHS consultants, were financially better off taking early retirement over continuing to work.

The State Pension will also increase in line with inflation, along with other benefits, from April.

Employment and skills

On top of reforms to pension rules, the Chancellor set out a number of measures to support older workers to return or stay in work. He announced a fivefold expansion of the DWP’s Mid-Life MOT programme to help over 50s access training and support to stay in employment longer.

Additional funding was also announced to help support more disabled people into long-term employment, and also to provide additional careers support to those leaving the care and fostering systems.