Chancellor Jeremy Hunt described his Budget as one for "growth" with a series of measures to encourage business investment and getting the economically inactive into the workplace
Mr Hunt said: “Our plan is working – inflation falling, debt down and a growing economy. Britain is on a lasting path to growth with a revolution in childcare support, the biggest ever employment package and the best investment incentives in Europe.”
Mr Hunt said the UK will not enter a “technical recession” this year as he summarised his plans to deliver growth for the UK economy. The Office for Budget Responsibility forecasts inflation to fall from 10.7% last year to 2.9% by the end of the year.
The size of the economy is predicted to shrink by 0.2% this year, before growing by 1.8% next year, 2.5% in 2025 and 2.1% in 2026. However, he said independent Office for Budget Responsibility now forecast that the UK will avoid a technical recession this year - defined as two consecutive quarters of declining GDP.
But what do measures set out in the budget mean for Wales?
The Barnett Consequential
The Chancellor announced an additional £180m for the Welsh Government via the Barnett formula over 2023-24 and 2024-25.
This, the UK Government said, is on top of record Spending Review 2021 settlements, which are still growing in real terms over the Spending Review period, and an additional £3.4bn at Autumn Statement 2022.
Mr Hunt added that £20m of funding had also been earmarked for the Welsh Government to restore the historic grade II listed Holyhead Breakwater at Holyhead Port. The UK Government said this would “ensure the long-term viability of this vital transport hub and trade links with the island of Ireland, as well as safeguard the hundreds of jobs this port support in Wales”.
Wales will also receive £175,000 to save the last remaining pub in the community in a village in Denbighshire.
Carbon Capture and Storage
The Chancellor said the UK Government would commit up to £20bn over the next two decades on low-carbon energy projects, with a focus on early deployment of carbon capture, usage and storage (CCUS), to help its climate commitments.
He said this will unlock private investment and job creation across the UK, including in North Wales.
“This will support up to 50,000 jobs, attract private sector investment and help capture 20-30 million tonnes of CO2 per year by 2030,” said Mr Hunt.
The UK Government said it will also kick-start the delivery of subsequent phases of this new industry in the UK, “taking advantage of the country’s natural comparative advantage in CCUS”.
A shortlist of projects for the first phase of CCUS deployment will be announced later this month. Further projects will be able to enter a selection process for Track 1 expansion launching this year, and two additional clusters will be selected through a Track 2 process, with details announced shortly.
Mr Hunt said he will also extend the Climate Change Agreement scheme for two years to allow eligible businesses £60m of tax relief on energy efficiency measures.
Nuclear Investment
Mr Hunt said nuclear energy will now be classed as “environmentally sustainable” to drive investment in the energy sector.
He also confirmed the launch of Great British Nuclear (GBN) to boost nuclear power and bring down costs.
GBN is the body which will be set up to oversee the delivery of new power plants to meet the aim for nuclear power to provide 25% of electricity by 2050. The UK Government has come under attack in recent months over delays launching GBN - with a warning it had “lost momentum” on nuclear.
A competition to deliver small modular nuclear reactors (SMRs) in the UK has also been pledged and will open this year. It hopes to attract designs from both domestic and international manufacturers with winners “announced rapidly”.
The government will also match a proportion of private investment as part of this to ensure designs are ready to be deployed as soon as possible in the UK.
The UK Government is already investing £210m into the Rolls-Royce SMR project. The Wylfa site on Anglesey and Trawsfynydd, Gwynedd, are frontrunners to host SMR plants.
Energy price cap
The Chancellor announced that the energy price guarantee, which caps average household bills at £2,500, will be extended from April to the end of June, saving a typical household £160.
It had been due to rise to £3,000 in April and the cost of scrapping the planned 20% increase will amount to around £3 billion.
Under the Energy Price Guarantee, the government has been limiting energy bills for a typical household to £2,500 a year, plus a £400 winter discount. But the £400 winter fuel payment will not be renewed, meaning households' costs will still rise in the short term.
This energy price cap is important to Wales where homes are less energy-efficient compared to the rest of the UK. While lower average incomes in Wales mean energy bills take up a larger proportion of households’ income than in more affluent parts of the UK.
The Chancellor also confirmed £200m to bring energy charges for prepayment meters into line with prices for customers paying by direct debit.
Tax breaks and investment zones
The Budget confirmed that the main rate of corporation tax, paid by businesses on taxable profits over £250,000, will increase from 19% to 25%.
A ‘full expensing’ policy will also be introduced from 1 April 2023 until 31 March 2026 and an extension to the 50% first-year allowance in the same period – a transformation in capital allowances worth £27bn to businesses over five years.
Mr Hunt also pledged a £500m per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits.
There is also a new tax credit for small and medium-sized firms that spend 40% of their expenditure on research and development. Tax reliefs for film, TV and video gaming will also be extended.
While simplifying tax for SMEs would benefit up to 220,000 businesses in Wales. Some 12 investment zones for the UK were also confirmed by the Chancellor.
These will be backed by £80m of funding each over five years, as well as tax reliefs, which will be used to improve skills, provide specialist business support, improve the planning system and local infrastructure.
While eight places in England have been shortlisted to host Investment zones, a low cost investment zone is also earmarked for Wales.
The UK Government said it is ‘working closely’ with the devolved administrations to establish how Investment Zones in Scotland, Wales and Northern Ireland will be delivered, which will account for the four final locations.
An investment zone in Wales could potentially centre around Swansea University and advances in renewable energy and carbon storage and capture technologies or Cardiff University and the wider compound semiconductor cluster.
Last year, Wales missed out on UK Government pilot investment to create three innovation based accelerator clusters with £100m of funding, which have been announced for Glasgow, Greater Manchester and the West Midlands.
The Welsh Government said it would look to engage constructively with the UK Government on creating an investment zone (or potentially more than one) in Wales.
A spokesman for the Cardiff Bay administration said: "We have engaged in a discussion with the UK Government about investment zones, and this engagement is ongoing. Any proposal for these zones in Wales would need to align with our policies on fair work and net zero.”
Back to work
Mr Hunt set out plans to encourage the over-50s, the long-term sick and disabled, and benefits claimants back into the workplace.
There are currently around 484,000 “economically inactive” people, aged 16-64, in Wales.
As part of his ‘back to work’ budget, the Chancellor set out plans to scrap the work capability assessment (WCA). He also said there would be tougher requirements to look for work and increased job support for lead child carers on universal credit.
A new voluntary employment scheme for disabled people and those with a health condition called Universal Support will also be funded in England and Wales. The government will spend up to £4,000 per person to find them a suitable role and cater to their needs, supporting 50,000 places per year once fully rolled out.
To encourage over-50s to return to the workforce, there would be more places on “skills boot camps".
The Administrative Earnings Threshold (AET), which determines how much support and Work Coach time a claimant will receive based on their earnings, will also be increased for an individual claimant, from 15 to 18 hours at National Living Wage.
While, over 100,000 non-working or low-earning individuals will be asked to meet with more regular Work Coach support to move into work or increase their earnings.
Childcare costs
UK childcare costs are among the most expensive in the world, with full-time fees for a child under two at nursery reaching an average of £269 a week last year - equivalent to around £14,000 annually.
A recent report from the Centre for Progressive Policy (CPP) revealed that the UK is losing out on economic growth worth up to £38bn every year because of unsuitable childcare - the equivalent of 1% of GDP.
The chancellor announced 30 hours of free childcare for working parents in England expanded to cover one and two-year-olds, in a bid to help them work more.
As a devolved matter, the Welsh government will decide if parents will get additional childcare support.
Currently in Wales, only working parents of three to four-year-olds can claim up to 30 hours of early education and childcare for a week, for up to 48 weeks of the year, provided they meet certain criteria. There is also 12.5 hours of free childcare a week for some children aged 2 years old living in more deprived areas of Wales under the Flying Start Scheme
This scheme is currently undergoing a phased expansion, and will eventually be available to all two-year-olds in Wales as part of a co-operation agreement between the Welsh government and Plaid Cymru.
Welsh ministers said they would be "carefully analysing the impact of the UK Spring Budget on our finances," and that any consequential funding would be allocated "in line with our priorities for Wales in the normal way".
The Chancellor announced the government will pay the childcare costs of parents on Universal Credit moving into work or increasing their hours upfront, rather than in arrears – removing a major barrier to work for those who are on benefits.
The maximum they can claim will also be boosted to £951 for one child and £1,630 for two children – an increase of around 50%.
Fuel and tobacco duty and a “Brexit pubs guarantee”
Fuel duty will be frozen for the next year, the Chancellor said.
He said: “For a further 12 months I’m going to maintain the 5p cut and I’m going to freeze fuel duty too. That saves the average driver £100 next year and around £200 since the 5p cut was introduced.”
The Chancellor added the Government would “uprate tobacco duty, and we will freeze the gross gaming duty yield bands”.
A “Brexit pubs guarantee” will see the duty on draught products in pubs up to 11p lower than the duty in supermarkets from August.
Mr Hunt said: “Today, I will do something that was not possible when we were in the EU and significantly increase the generosity of Draught Relief, so that from 1 August the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets, a differential we will maintain as part of a new Brexit pubs guarantee.
“British ale may be warm, but the duty on a pint is frozen.”
Pensions
The cap on the amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax, which was currently at £1.07m, has been scrapped.
This, Mr Hunt said, would simplify the tax system through taking out of the complexity of pension tax and stopping over 80% of NHS doctors from receiving a tax charge for any additional hours worked.
He also announced a tax-free yearly allowance for pension pots to rise from £40,000 to £60,000 - having been frozen for nine years
