Spring Budget 2023: The Chancellor’s Key Announcements

Chancellor Jeremy Hunt unveiled his first Spring Budget in the House of Commons today (15^th March 2023). Continue reading to discover the key announcements in the Spring Budget 2023.

Spring Budget 2023 overview

Jeremy Hunt has told MPs in his Spring Budget 2023 that the UK economy will avoid a recession in 2023 as inflation plunges from highs. Today (15^th March 2023), Jeremy Hunt delivered his second major fiscal statement as Chancellor, stating: “In the fact of enormous challenges I report today on a British economy which is proving the doubters wrong.”

The Chancellor said the Office for Budget Responsibility (OBR) now predicts the UK will avoid a technical recession – two straight quarters of falling GDP – and that inflation will more than halve by the end of the year. In light of the latest predictions by the OBR, Jeremy Hunt said improving global conditions and actions taken by ministers after Liz Truss’s mini-budget meant the UK is now expected to avoid an economic recession.

The Chancellor also announced that GDP is expected to contract by just 0.2pc in 2023, down from a gloomier prediction of 1.4pc in November. After that, the economy is expected to grow every year to 2027, including 1.8pc in 2024; 2.5pc in 2025; 2.1pc in 2026; and 1.9pc in 2027. Unemployment is also not expected to rise by more than one percentage point, while record inflation is expected to decrease dramatically.

To read the Spring Budget 2023, please visit the government’s website.

Key Announcements in the Spring Budget 2023

Energy

The government’s Energy Price Guarantee, scheduled to end on the 1^st April 2023, will be extended for three months until the end of June. This will save the average family £160 on their energy bills. The Chancellor also confirmed that the prepayment premium, where customers who use energy prepayment metres pay more than those on direct debits, would be scrapped from July. This is expected to save about four million households £45 a year.

Business and trade

Despite warnings from a chorus of business leaders that higher taxes will negatively impact growth, Jeremy Hunt has confirmed he will go ahead with the planned rise in Corporation Tax effective from April 2023. The main rate of Corporation Tax, paid by the business on taxable profits over £250,000, will increase from 19% to 25%. Companies with profits between £50,000 and £250,000 will pay between 19% and 25%, and those with profits less than £50,000 will see no change – they will continue to pay Corporation Tax at 19%. The Chancellor claims that just one in ten companies will pay the 25% tax rate.

Childcare

As part of the “back-to-work” budget, the Treasury looked at ways to make childcare more affordable. The Chancellor announced that people on Universal Credit could claim more cash to put towards childcare and receive funding upfront. The current provision of up to 30 hours a week of funded childcare in England for parents of three and four-year-olds has been extended to cover one and two-year-olds.

Pensions

Chancellor Jeremy Hunt surprised MPs today in the House of Commons by abolishing the lifetime allowance. The lifetime allowance is the maximum amount workers can put into their pension pots before they are taxed – the lifetime allowance is currently £1.07m. The tax-free yearly allowance for pension pots is also set to rise from £40,000 to £60,000.

Fuel duty

The Chancellor announced that the planned rise in fuel duty would be delayed again in April. Increasing the levy in line with RPI inflation would have added 7p to the price of a litre of fuel. Additionally, the 5p fuel duty cut was also due to end. The two factors combined would mean the fuel cost would rise by approximately 23pc – an extra 12p per litre. However, Jeremy Hunt confirmed that the temporary cut would be extended by 12 months, and the inflationary rise held back again.

Jobs and work

The government has announced a new fitness-to-work testing regime that individuals must complete to qualify for health-related benefits. There will also be stricter requirements to look for work and increased job support for lead childcarers on universal credit. The Chancellor also announced a new voluntary employment scheme called Universal Support which would provide funding for up to 50,000 places on the employment scheme for disabled people.

Investment Zones

The government has announced plans to create 12 new investment zones across the UK. The investment zones will be led by partnerships between local authorities, businesses and universities to encourage innovation. The new investment zones will be located in Greater Manchester, the North-East, West Midlands, West Yorkshire, South Yorkshire, East Midlands, Liverpool and Teeside. There will also be at least one in Wales, Scotland and Northern Ireland.

Prizes for AI researchers

To make the UK a leader in artificial intelligence (AI), Jeremy Hunt announced plans to boost the country’s computing power and encourage innovation. The Chancellor has accepted a proposal to provide £900m towards developing a new cutting-edge computer for the UK. The government will also iron out AI issues with the Intellectual Property Office and launch a new “AI sandbox” to help companies bring products to market more quickly and efficiently. The government has also published a new strategy to make the UK a leader in quantum computing, which will see £2.5bn dedicated to research up to 2033. The Chancellor has also pledged a new annual prize of £1m which will be awarded every year for the next ten years to the AI researcher who has produced the best innovation.

Defence spending

Jeremy Hunt announced that the UK would be given an additional £11bn for the defence budget over the next five years. The Chancellor says this comes after a £5bn package of funding for the Ministry of Defence announced by the Prime Minister earlier this week. He said: “I can confirm that we will add a total of £11 bn to our defence budget over the next five years, and it will be nearly 2.25% of GDP by 2025.

We were the first large European country to commit to 2% of GDP for defence and will raise that to 2.5% as soon as fiscal and economic circumstances allow.”

The government will also provide the Office of Veteran Affairs with a funding boost.

Other important measures

• The government has committed an additional £20m over the next two years to charities helping to prevent suicide.
• As part of the Chancellor’s commitment to protecting taxpayers and public services, he has introduced prison sentences for those convicted of marketing tax avoidance schemes.

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