Yesterday, Chancellor Jeremy Hunt delivered the UK’s first Budget in 17 months. Branded as the ‘budget for growth’, this year’s Spring Statement focussed on tackling the cost-of – living crisis and introducing measures to help people return to employment.
With an emphasis on providing support to working families, the Budget also offered a preview for how the Conservatives will position themselves at the next General Election, as they try to maintain their grip on key ‘Red Wall’ constituencies.
Hunt claims this Budget will deliver “prosperity with a purpose” but will his policies live up to this?
Here is a summary of the key announcements:
Say: “Making Britain the best place to do business”
Do: Hunt stated he wants to create “the most pro-business, pro-enterprise tax regime anywhere”, yet went ahead with the planned rise in corporation tax despite growing pressure from Conservative backbenchers to scrap this. These are the ways in which the Chancellor plans to ensure the UK is “Europe’s most dynamic enterprise economy”:
- Increasing the corporation tax rate by 6% from 19% to 25%. This increase will impact companies with profits of more than £250,000. Businesses with profits between £50,000 and £250,000 will get marginal relief whereas those with profits of less than £50,000 will see no change
- The introduction of a new policy of “full expensing” for the next three years to replace the corporation tax super deduction which ends this month. This will allow companies to be able to write off the full cost of qualifying plant and machinery investment in the year they invest
- An enhanced rate of tax relief for research intensive SMEs spending more than 40% of their total expenditure on R&D, allowing them to claim a credit worth £27 on every £100 they spend
- The introduction of 12 Investment Zones which will each receive £80m in funding over five years, including tax reliefs, with the aim of creating ‘new Canary Wharfs’. These will be in the West Midlands, Greater Manchester, the north-east, South Yorkshire, West Yorkshire, East Midlands, Teesside, and Liverpool. There will also be at least one in Scotland, Wales, and Northern Ireland.
Hunt also aims to strengthen the UK’s innovation industries, by making progress in the life sciences sector, and the UK’s position in artificial intelligence by introducing:
- Increased funding into the Medicines and Healthcare products Regulatory Agency (MHRA)’s model to allow for them to explore partnerships with trusted international agencies to allow for rapid approvals for medicines and technologies already approved by them
- Creating a new approval process for the MHRA from 2024 to encourage swift approvals
- A £900m investment to build an exascale supercomputer and establish a new AI Research Resource to allow for the UK’s AI community to remain internationally competitive
- The introduction of a £1m yearly prize for the next 10 years awarded to researchers driving progress in AI.
Say: “Breaking down barriers that stop people working”
Do: The UK’s workforce is facing a long-term widespread rise in economic inactivity due to long-term sickness, and the Chancellor is facing significant pressure from businesses and MPs to address the ongoing crisis in the sector. To tackle unemployment, Hunt has outlined what is apparently the biggest positive supply side intervention the Office for Budget Responsibility have ever recognised in their forecast:
Since 2013, the number of disabled people in work has risen by two million, however, the Chancellor aims to increase this further by publishing a White Paper on disability benefits reform, which would be the “biggest change to our welfare system in a decade”. These changes include:
- The abolishment of the Work Capability Assessment and separate benefit entitlement from an individual’s ability to work so claimants will be able to seek work without fear of losing their benefits
- Increased funding into Work Coaches to support disabled people or those with a long-term sickness
- The introduction of a new programme: Universal Support. This will help individuals who want to work find appropriate jobs and get the support they need
Currently, 3.5 million people over the age of 50, but under the age of retirement, are not part of the workforce, a figure which has increased by 320,000 since before the pandemic. This is what Hunt has laid out to help those who wish to go back to work:
- Increased tax relief on pensions to encourage workers over 50 to re-enter the job market. From April 2023, the Lifetime Allowance change will be removed before it is abolished entirely from April 2024
- Increasing the pensions annual tax-free allowance by 50% from £40,000 to £60,000
- The introduction of a new kind of apprenticeship, called ‘Returnerships’ targeted at those aged over 50 who want to return to work. These will be run alongside skills boot camps and sector-based work academies
The Government also unveiled plans to increase access to childcare for working families in England. To do this, they will:
- Introduce 15 hours of free childcare from April 2024 for parents of two-year-olds. Children from nine months will also get 15 hours free childcare from September 2024 and all eligible children under the age of 5 will get 30 hours free childcare from September 2025. These hours will only be available to parents who both work 16 hours a week
- Increase the maximum amount parents in receipt of Universal Credit can claim for childcare to £951 for one child and £1,630 for two children, an increase of almost 50% and paying out costs upfront rather than in arrears.
Say: Easing the “enormous pressure on family finances”
Do: While inflation is showing signs of easing, households are still feeling the pinch, particularly from rising energy prices. Energy bills skyrocketed over the last year, with the cost of electricity and gas increasing by 66.7% and 129.4% (respectively) between January 2022 and 2023.
The Government had faced pressure from to extend support for households struggling to pay their bills from charities such as Citizens Advice and money saving expert Martin Lewis. In response, today Hunt pledged to:
- Extend the current household Energy Price Guarantee (currently at £2,500) for a further three months. Bills had been set to rise to £3,000 per year from April
- Suspending the planned rise in fuel duty – a tax charged on fuels used in vehicles or for heating – and keep the current 5p per litre cut in place for another year. According to Hunt, this means that the average driver will save £100 over the next 12 months
- Ending the prepayment meter penalty so households on using these meters will no longer pay more than people on direct debit plans
- Despite these measures, the Government will not extend the £400 a year winter discount on energy bills, which had been available to most households, after the end of March.
Say: Delivering a “clean energy reset”
Do: Hunt announced new measures to help the UK meet its net-zero targets, with a particular focus on scaling up the UK’s Carbon Capture, Usage and Storage (CCUS) and nuclear industries. This includes:
- The extension of the Climate Change Agreement scheme for a further 2 years
- Providing up to £20bn funding for early deployment of CCUS, with the goal of unlocking private investment and job creation across the UK, particularly on the East Coast and the North West of England, as well as in North Wales
- Launching ‘Great British Nuclear’ (GBN) to develop the UK’s nuclear market and leverage private investment into its clean energy future. GBN will launch the first staged competition for Small Modular Reactors
- While the initial focus of GBN will be on Small Modular Reactors, further large Gigawatt-scale projects will also be considered subject to value for money, relevant approvals, and technology readiness and maturity, to help deliver net zero.