Chancellor of the Exchequer, Jeremy Hunt yesterday presented his “Budget for Growth” to the House of Commons, updating the nation on economic forecasts, the state of the public finances and his plan to boost business investment. The economic environment has improved since he delivered the Autumn Statement in November 2022 but the Chancellor’s message and announcements were still carefully managed and carried a cautious tone.
Despite reports that this would be a “boring” Budget, the Chancellor has announced significant policy changes on childcare, disability benefits and the lifetime allowance on pension savings. Below we have covered the key announcements and themes of the speech, for further details and analysis please email TeamPA@plmr.co.uk
- The Chancellor’s speech can be read here.
- The Budget Statement can be read here.
- The Treasury’s press release can be read here.
- The Office for Budget Responsibility Economic and fiscal outlook can be read here.
1. The Economic Outlook
- The OBR has stated that the UK has avoided a technical recession in 2023. The OBR predicts UK economy to contract by -0.2% this year.
- Growth: After this year the UK economy will grow in every single year of the forecast period: by 1.8% in 2024; 2.5% in 2025; 2.1% in 2026; and 1.9% in 2027.
- Inflation: the OBR has forecast price rises to fall to 2.9% by the end of 2023, down from current levels of 10.7%.
- Debt: underlying debt to be 92.4% of GDP by next year, falling every year after until 2027-28.
- Public Sector Borrowing: OBR today confirmed Government is meeting the rule that public sector net borrowing must be below 3% of GDP over the same period, with a buffer of £39.2bn and the deficit falls in every year of the forecast, borrowing falling from 5.1% in 2023-24 to 1.7% 2027-28.
2. Continuing to support with the cost of living
- Energy Bills: The Energy Price Guarantee (EPG) will be kept at £2,500 for an additional three months from April to June, saving a typical household £160. Furthermore, the cost of energy pre-payment meters will be brought into line with direct debit payments (further details here)
- Fuel duty: remains frozen and the 5p reduction maintained for a further year, following the annual campaigning by Conservative MPs and The Sun newspaper.
- Third Sector support: DCMS will be provided with £100m to support thousands of local charities and community organisations and £10m for the next 2 years for the voluntary sector to help prevent suicide.
- Leisure Centres and Swimming Pools: £63 million fund to keep swimming pools afloat in wake of high energy costs.
- “Brexit Pubs guarantee”: increase draft relief for pubs, it will be 11p lower than supermarkets
- Support the cultural sector: tax relief for theatres, orchestras, and museums & galleries will stay at rates of 45%-50% until 2025.
3. Plans to boost economic growth
- Hunt restated his approach to achieving business investment and growth through the “Four E’s” announced in January: Enterprise, Education, Employment and Everywhere.
- 12 new investment zones: 8 locations in England are now eligible to host a UK investment zone and a further 4 will be announced across Scotland, Wales and Northern Ireland. The locations will be invited to put forward their plans to propel growth in the priority sectors and will have access to interventions worth £80 million over 5 years. A policy paper on the announcement has been published and can be found here.
- New levelling up partnerships: providing over £400 million and bringing the collective power of government to provide bespoke place-based regeneration in 20 of England’s areas most in need of levelling up over 2023 and 2024-25. There is also a further £200 million for 16 regeneration projects in England.
- City Region Sustainable Transport Settlements: £8.8 billion funding over 5 years in next round of local transport funding. This will help to develop mass transit networks & sustainable transport options across England’s city regions, unlocking growth and helping to level up.
- Round 3 Levelling Up Fund: providing a further £1bn to local communities. The funding will help to invest in new local priority infrastructure projects across the country.
- Devolved Administrations: The Chancellor stated there was increased funding by £630 million over the next two years, with the uplift providing over £320 million for the Scottish Government, £180 million for the Welsh government and £130 million for the Northern Ireland Executive.
- Trailblazer devolutions deals: Agreed with the Greater Manchester and West Midlands Combined Authorities to give them greater control over local transport, skills, employment, housing, innovation and net zero priorities, as well as single funding settlements at the next Spending Review. This will provide the blueprint for the future of devolution in England.
- Corporation Tax: April’s tax rise will go ahead taking the UK’s corporation tax rate up to 25%. The Chancellor stated that just 10% of companies will pay the full 25% rate.
- Capital Expensing: Investments can be deducted from taxable profits – a tax cut worth £9 billion a year, reducing tax by up to 25p for every £1 a business spends on IT, plant and machinery equipment. The OBR says it will increase business investment by 3% for every year it is in place.
- R&D support for SMEs: The Chancellor will introduce additional tax support to help research & development intensive SMEs. For every £100 spent on R&D, eligible companies will be able to claim £27 back, helping them to invest in more R&D and grow for the future.
- Support for UK TV and Entertainment industries: Chancellor will introduce an expenditure credit with a rate of 34% for film, high end television and video games and 39% for the animation and children’s TV sectors.
- Climate Change Agreement Scheme: will be extended for two years to allow eligible businesses £600 million of tax relief on energy efficiency measures.
- Carbon Capture & Storage: £20bn of funding has been announced to support carbon capture & storage projects across the United Kingdom – particularly on the East Coast and in the North West of England and North Wales.
- Nuclear Power: Great British Nuclear will be launched, nuclear power will be classed as “environmentally sustainable” which will give it access to the same investment incentives as renewable energy.
- Small Modular Reactors: First staged competition to establish these plants will be announced, if viable, the Government will co-fund future projects.
- Life Sciences: From 2024, the MHRA will move to a different model which will allow rapid, often near automatic sign-off for medicines and technologies already approved by trusted regulators in other parts of the world such as the United States, Europe or Japan.
- Vallance Review: All nine of the digital technology recommendations made by Sir Patrick Vallance in the review announced in the Autumn Statement.
- Quantum Strategy: Government to publish a quantum strategy which will set our vision to be a world leading quantum enabled economy by 2033 with a research and innovation programme totalling £2.5 billion.
- The Manchester Prize: Government will award a prize of £1m every year, for the next ten years, to the person or team that does the most ground-breaking British AI research.
- The Health and Disability White Paper: Has been published by DWP today (see here) will abolish the Work Capability Assessment in Great Britain and separate benefit entitlement from an individual’s ability to work.
- A new Universal Support programme: To help disabled people & those with long-term help conditions to find jobs & stay in work. Government will provide 4,000 per person to help find new jobs and will help 50,000 people every year once rolled out. £1m plan to give more resources to mental health and muscular-skeletal support in the workplace.
- Supporting Young people in care: doubling the Qualifying Care Relief threshold to £18,140 which will give a tax cut to a qualifying carer worth an average of £450 a year, will also increase the funding we provide to the Staying Close programme by 50% to help more care leavers into employment.
- Sanctions: Will be applied more rigorously to those who fail to meet strict work-search requirements or choose not to take up a reasonable job offer. The Administrative Earnings Threshold from the equivalent of 15 hours to 18 hours at National Living Wage for an individual claimant, meaning that anyone working below this level will receive more work coach support alongside a more intensive conditionality regime.
- Supporting Older people back into the workforce: First, Government will increase the number of people who get the best possible financial, health and career guidance ahead of retirement by enhancing the DWP’s “Mid-life MOT” Strategy from 8,000 to 40,000 a year. Secondly, will introduce a new kind of apprenticeship targeted at the over 50s who want to return to work called “Returnerships” and thirdly, will increase the pensions annual tax-free allowance by 50% from £40,000 to £60,000 and abolish the Lifetime Allowance altogether.
- Landmark Childcare announcement: 30 free hours of childcare per week for children from 9 months to 4 years, worth £6,500 per year per child from 2025, to be introduced in stages:
- Working parents of 2 year olds will be able to access 15 hours of free care from April 2024
- From September 2024, that 15 hours will be extended to all children 9 months up
- From September 2025, every working parent of under-5s will have access to 30 hour free childcare per week
- Increasing the Universal Credit childcare cost maximum: the Government hopes this will encourage more Universal Credit claimants to take up work. Increasing the Universal Credit childcare cost maximum amounts to £950 for one child and £1,629 for two children.
- Increasing the hourly rates paid to providers of free childcare: DfE will pay £204 million next year, increasing to £288 million by 2024-25, with further uplifts to follow each year, to support the sector to meet rising costs and facilitate the expansion of new free hours and improve quality of provision.
- Introducing market reforms to the childcare sector: Reforms to minimum staff-to-child ratios for 2 year olds, moving from 1:4 to 1:5 to align with Scotland. The change being introduced will bring England’s requirements more closely in line with international norms.
- Wraparound school care: Government will fund schools and local authorities to increase supply of wraparound care so all school-age parents can drop their children off between 8 am and 6 pm. The ambition is that all schools will start to offer a wraparound offer, either on their own or in partnership with other schools, by September 2026.
- Special Educational Needs and Disabilities: £3m pilot expansion of the Department for Education’s Supported Internship programme to help SEND learners transition from education into the workplace.
4. Other Announcements
- Defence Budget: Total of £11bn added over the next five years taking commitment to 2.25% of GDP. There is also a further £33 million to support the Office for Veterans Affairs.
- £11.5m employment support programme to help up to 10,000 Ukrainians in the UK.
- They will uprate tobacco duty, freeze gross gaming duty yield bands, they are maintaining the starting rates for savings and ISA subscriptions limits. They will bring forward a range a measures to tackle promoters of tax avoidance schemes. Taken together, this will lead to a slightly lower overall tax burden for the rest of parliament than forecast in the OBR’s autumn assessment.
- Councils across England will get additional funding to help tackle potholes, through an extra £200m for pothole repairs.