Budget 2023 – What to expect
This Wednesday (15th March), Jeremy Hunt will deliver his Spring Budget – the second fiscal statement since his appointment as Chancellor of the Exchequer. Mr Hunt will make his address to the Commons at around 12.30pm, following Prime Minister’s Questions.
Cavendish Advocacy has prepared a short briefing note on what you might expect to hear from the Chancellor on Wednesday. You can find this here.
Fiscal and Political Background
Despite pressure from the right of the Conservative Party, who believe that tax cuts are needed to shake Britain out of its current period of low-growth and high-inflation, the Chancellor has already rejected these calls. Instead, this will be the Budget confirming the 6 percentage point rise in the main rate of Corporation Tax and implementing the international agreement to create a minimum tax on large multi-nationals of 15% by the end of the year.
For Jeremy Hunt, who was swept into 11 Downing Street to restore order after the Truss/Kwarteng ‘mini-Budget’, unfunded fiscal loosening at this time remains unwise. While he appears to have more options than anticipated, thanks to an unexpected £30bn windfall in the public finances (partly from high than anticipated tax income in 2022-22), the Treasury views these receipts as one-offs and not a reason to take on new, ongoing liabilities like high public sector pay awards or significant tax cuts. Instead, the Chancellor intends to grow the economy through regulatory changes and measures to stimulate the labour market.
Mr Hunt’s primary focus with the Spring Budget will be to get Britain back to work. Treasury officials believe that the number of people out of work is now a major barrier to economic growth and productivity, with an estimated 6.6 million working ahead adults classed as economically inactive. The Chancellor is therefore expected to unveil a package of measures designed to encourage early retirees back to work, including an expansion of its “midlife MOT scheme” and an uplift to the lifetime pension allowance. Alongside this, we anticipate policy announcements to help with the cost of childcare, in recognition of the role this is playing in the absence of women from the workforce.
In addition, it has already been well-trailed that the Chancellor will cancel a reduction in support that would have seen typical annual energy bills rise from £2,500 to £3,000 – though it is unclear whether support for businesses will be retained.
This Spring Budget is therefore likely to be focused on stability and solving economic problems, with the popular retail offers for voters left to the pre-election Budget, expected in March 2024.
The Chancellor’s Priorities
- Cutting inflation
- Retaining market confidence and stability through fiscal credibility
- Tackling inactivity in the labour market
- Continued support for energy bills and green energy investment
- Reducing the national debt over time
Anticipated Headline Announcements
- Confirmation of a 6% rise in Corporation Tax for large businesses, from 19% to 25% and the end of the super-deduction tax break for investment
- Implementation of the international agreement on the minimum tax for large multi-nationals at 15%
- The creation of a less generous capital allowances scheme for business investment, which may include full expensing, to soften the blow of the Corporation Tax rise and the end to the super-deduction tax break
- The maintenance of support for energy bills for another three months, keeping average annual costs at £2,500 per household (though it is unclear whether support for businesses will be retained)
- An expansion of the mid-life MOT for over-50s
- A potential uplift to the pension lifetime allowance
- A crackdown on sick notes by changing how these are issued by GPs
- A potential decision to bring-forward the point at which the pension age increases to 68, from 2044/46 to the mid-2030s.
- A range of measures to increase the support available for childcare costs, including an expansion of the 30 hour per week support to one- and two- year old children
- A freeze to fuel duty
- A Government investment of £20bn into carbon capture and storage projects over the next 20 years
- An end to the “PPM Penalty” – the higher charges faced by residents with energy pre-payment meters
- A reduction in the lever of research and development tax relief available for small businesses
- A multi-billion-pound boost in spending on Defence modernisation
- A freeze on Alcohol Duty
- A rejection of calls for a new levy on single-use vapes
For further detail on the Spring Budget, download the briefing here. For more information, or to discuss the Budget, please contact enquiries@cavendishadvocacy.com
