Just as I am now very much used to writing budget updates, most of us have become accustomed to the recent economic turbulence that has engulfed the UK. From the fallout of the COVID-19 pandemic, we have moved to the war in Ukraine, a cost of living crisis, political turmoil at home, and most recently, the collapse of the Silicon Valley Bank. For many, the spiral of economic difficulty appears to keep turning.
Despite this, the Chancellor, Jeremy Hunt, having received some positive fiscal news in recent days, looked to push on from his stability focussed Autumn Statement, to a Budget designed to grow the UK economy. The budget, and each of the Chancellor’s measures, centred on four key pillars: Enterprise, Education, Employment, Everywhere.
- Corporation Tax will rise from 19% to 25% from 1 April 2023. For those companies with profits between £50,000 and £250,000, the rate will be tapered between 19% and 25%.
- Businesses will however be able to deduct investment in new machinery, IT and plant against their taxable profits – a reform of the “Super Deduction”.
- Tax incentives will also be offered to 12 “Investment Zones” across the UK, along with £80m of funding each, which the Chancellor described as creating “12 Canary Wharfs”.
- The hope is that the above two measures will offset some of the tax liability which businesses will incur from the rise in the rate of Corporation Tax.
- Fuel Duty has been frozen for a further 12 months, with the 5p cut maintained until April 2024.
- Alcohol taxes will mostly rise with inflation in August, but a new relief for “draught” products in pubs means beers, ciders and wines sold there will see up to 11p in taxes and duties removed.
- The Energy Price Guarantee, set at £2,500 since the Autumn, was due to rise to £3,000 come April 1st, but has been extended by three months. It will now stay at £2,500 until 30 June 2023.
- On pre-payment meters, £200m has been committed so that the associated charges are brought in line with direct debit and other payment methods – this will affect up to 4 million households.
- £20bn will be invested up to 2050 on low-carbon projects, with a key focus on carbon capture and storage – it is expected that up to 50,000 jobs will also be created.
- Nuclear energy has now been classed as “sustainable”, giving those in this sector access to more public funding, along with tax and investment incentives.
- 30 hours of free childcare will now be offered to parents, covering children from as young as 9 months old. However, this is a phased measure, with 15 hours of childcare being given to different age groups throughout 2024, before the full 30 hours is granted in 2025.
- Families receiving Universal Credit will now receive their support up-front, rather than this being provided in arrears. The cap per child has also risen from £646 per child, per month, to £951.
- The annual tax-free pension allowance has risen 50% from £40,000 to £60,000 – it had previously been frozen for 9 years.
- Meanwhile, the Lifetime Pensions Allowance, which previously had been set at £1,073,100, has been abolished in its entirety.
Welfare & Job Creation
- Over-50s will be encouraged to retrain and re-enter the UK job market, with new apprenticeships dubbed “Returnerships” being created to assist with this.
- More places on the Government’s “skills boot camps” will also be offered to encourage re-entry into the job market.
- The welfare, and particularly the testing of “fitness to work” has been reformed. Up to 50,000 places will be offered on the new “Universal Support Scheme”, giving up to £4,000 of support for those with a disability looking for work.
- The Work Capability Assessment, which evaluated those accessing certain government schemes for their eligibility, is to be scrapped.
What else was introduced
- There will be an immediate increase of £5bn to the defence budget, with this to be increased by £11bn over the next 5 years. The Government’s ambition is to hit 2.5% of GDP.
- A new streamlined process with the MHRA will see new medical products approved quicker.
- £100m for charitable causes across the UK, with £10m specifically going to suicide prevention charities.
- £900m for a new super-computer facility, along with a £1m prize for each of the next ten years for the UK’s most innovate AI project each year – dubbed the “Manchester Prize”.
What does this mean for you personally, and your businesses.
Inflation is expected to fall to 2.9% by the end of 2023, a sizeable drop from the 10.7% it reached at the end of 2022, and substantially down from previous estimates. However, as mentioned in my previous update – the prolonged inflationary pressures being faced by all of us, plus rising costs including Council Tax bills from next month, mean there is still likely to be a significant squeeze on our finances for the coming months, even with the National Living Wage increase which will shortly take effect.
The Government is also heavily relying on older workers and those currently inactive in the employment market (for reasons such as childcare and caring responsibilities) taking up the incentives offered. Whether this works is highly uncertain – the OBR estimates as many as 240,000, or as few as 55,000 may return to the workforce. Given there are 1.1m vacancies at the time of writing, there would still be considerable gaps to fill, and some key areas, in particular within the NHS (a long-term workforce plan is due shortly), and teaching, have not been specifically addressed.
It remains to be seen how the Government addresses these, and the other issues affecting the economy, not least the on-going industrial action in many sectors including the NHS and education, the latter of which directly impacts parents’ ability to work, and the effectiveness of some of the measures announced. Whilst this budget answers some of the questions currently facing the Government, there is a lingering sense that many more remain, and there is still a long way to go until we reach more stable times.
If you have any queries on how these changes might apply to you, or need advice in what are undoubtedly testing times, Leathes Prior’s business & commercial teams and other departments are ready to assist. Please contact us by email or by calling 01603 610911. To keep up to date with the ongoing news, make sure to follow the Leathes Prior social pages (LinkedIn, Instagram, Twitter, and Facebook).