The Chancellor, Jeremy Hunt, delivered the 2023 Spring Budget today, announcing that “the British economy is proving the doubters wrong”.
Among the measures included in the budget were an extension of the energy price guarantee and a freezing of draught beer duties, while Hunt’s pension reforms went further than most had expected.
Pension lifetime allowance abolished
“I told you it was going to be a back-to-work Budget,” Jeremy Hunt said, with economic inactivity a major target.
However, the Chancellor’s reform of pension taxes went beyond expectations.
The £1m cap on how much can be put into pension funds before taxes kick in was expected to be raised. Instead, it has been abolished, in a move aimed at encouraging doctors in particular to delay retirement.
The annual tax free contribution for pensions will also be increased from £40,000 to £60,000
“No one should be pushed out of the workforce for tax reasons,” Hunt said.
Energy price guarantee and the cost of living
Most households hoped the budget would include further relief for energy bills, and that was delivered hours before Jeremy Hunt took to his feet, when the Treasury announced an extension to the Energy Price Guarantee.
Under the extension, average bills will be capped at £2,500 a month until June, rather than increasing to £3,000 next month as planned.
There were also measures to help with childcare costs - which Hunt said would also encourage more parents to return to work - including expansion of the 30 hours of free childcare per week to one- and two-year-olds.
Fuel duty and VAT on fuel were both frozen, meanwhile.
Corporation tax reforms
The Chancellor said the UK will have “the most pro-business tax regime in the world,” even after the upcoming rise in corporation tax.
“Conservatives know the importance of a low-business tax regime, but I want us to have the most pro-business, pro-enterprise tax regime in the world,” he said.
Hunt said that even after the rise in corporation tax from 19% to 25% in April, the UK will have the lowest rate in the G7.
The Chancellor also announced a new policy of “full expensing”, allowing for companies to deduct all of their spend on IT equipment, plants or machinery from their tax bills.
The policy will be in place for the next three years, but Hunt said the Government intended to make it permanent.
“It is a corporation tax cut worth an average of £9 bn a year for every year it is in place,” Hunt said.
The Budget came amid concern that London was losing top firms to New York, with businesses like CRH and Arm announcing plans for US listings.
Hunt did not announce a plan to keep firms in London today, but said he will return in his Autumn Statement with a plan to boost the London Stock Exchange as a “more attractive place to list”
Draught beer duties frozen
Earlier this weekm Andy Slee, who leads the Society of Independent Brewers warned the industry “is facing steeply rising costs, and a fall in consumer spending due to the cost of living crisis. For many breweries the battle to stay afloat is proving a real challenge”.
Hunr promised relief to the brewing sector, extending the alcohol duty freeze until 1 August.
“British ale may be warm, but the duty on a pint is frozen,” Hunt said.
Tim Martin, the founder and chairman of JD Wetherspoon, welcomed the freezing of duty on beer, but he says more needs to be done to close the gap in tax on pubs versus supermarkets.
“We will investigate how much of the tax disparity remains after this move,” he said. “We retain our view that anything less than equality is an unsustainable distortion and is economically counterproductive.”
Universal Credit reforms
Also part of the “back-to-work Budget” were a number of changes to benefits, intended to encourage more people to reenter the workforce.
Hunt announced a number of reforms that he said “remove barriers that stop people who want to from working”, as part of what he has labelled his “back-to-work Budget”.
The government plans to abolish the work capability assessment and separate benefit entitlement from the right to work.
“Benefit claimants will be able to seek work without fearing losing their support,” he said.
The Chancellor said he would also aim to get more people into work by tightening the rules around Universal Credit for jobseekers.
Hunt noted that there are more than 2 million jobseekers without a health condition who are looking for work or on low earnings.
“Sanctions will be applied more rigorously to those who fail to meet strict work search requirements or who fail to take up a valid job offer,” he said.
No recession in 2023
Besides the new measures, Hunt also revealed the OBR’s latest projections for the economy.
Previous OBR forecasts had predicted a recession in 2023, but Hunt said one is no longer expected.
the economy will still contract by 0.2%, but will not meet the definition of a recession, which is two consecutive quarters of negative real growth. The economy will then return to growth over the next four years.
Inflation, meanwhile, it set to fall from a high of 10.7% in Q3 of last year to 2.9% at the end of 2023.
The Government is also set to meet its goal of debt as a percentage of GDP falling within five years.
