March Budget 2023: Part 2

The Budget was delivered on 15^th March by Jeremy Hunt. It included a number of small changes and a couple of major ones.

The biggest change was a significant relaxation of pension allowances, although rumours were circulating in the days before the announcement itself.

The cost of living and the NHS have been two of the public’s headline concerns since the last Budget, but measures in these areas were remarkably light.

The focus seems to be on growth and getting (and keeping) as many people as possible in work.

Below, we’ve summarised the key points that might affect you directly.

Read part one here.

The Economy 

• Inflation, which exceeded 10% in 2022, is expected to stabilise at 2.9% by the end of 2023.

• GDP is likely to reduce by 0.2% rather than 1.4% as predicted in November. This indicates that growth is slowing, but not to the extent originally feared.

• Growth is expected to return to positive levels from 2024, with a rate of 1.8% predicted. Figures of 2.5% and 2.1% have been estimated for 2025 and 2026 respectively. Compared with November’s forecast, this suggests a quicker recovery, but slower growth thereafter.

• Public sector debt should peak at 97.3% in 2025/2026, reducing to 94.6% by 2027. These figures are somewhat more optimistic than the 97.6% and 97.3% predicted in the last Budget.

• It is likely that the UK has avoided recession, but growth remains fairly stagnant.

Cost of Living

• The energy price cap, which was set to increase to £3,000, will now remain at £2,500 until July. This will save the average family £160.

• £63 million will be set aside to support leisure centres with energy costs, with a further £100 million available to help charities.

• Energy prices for customers on prepayment meters will be equalised with those on direct debit contracts.

 Work and Benefits

• The work capability assessment for those on benefits will be scrapped. A new ‘fitness to work’ process will take its place, although the details have yet to be clarified.

• Voluntary employment schemes will be introduced for disabled people. Up to 50,000 people could receive £4000 in support

• £400 million will be set aside for workers’ mental and physical health support.

• Universal credit claimants who are not disabled will face more rigorous requirements in their search for work.

• ‘Returnerships,’ a form of apprenticeship for the over 50s, will be introduced to encourage workers seeking a midlife career change.

• Immigration rules will be relaxed for workers in the construction sector to help deal with labour shortages.

  
  
  

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Childcare

• Parents will be offered 30 hours a week of free childcare for children aged 9 months to 3 years. This is on the condition that both parents work at least 16 hours a week. The change will start to be phased in gradually and should be fully implemented by September 2025. This could save families up to £6,500 per year. The funding for free nursery places will be increased by £204 million by this September.

• More funding will also be available for wraparound care for school-age children.

• Universal credit claimants who are receiving childcare support will receive their payments upfront instead of in arrears. The cap on childcare payments will increase from £646 to £951.

• To help cope with the additional demand, the strict staff to child ratio rules will be relaxed, and incentive payments will be offered to those wishing to become childminders.
  
  Tax
  

  • The 5p cut to fuel duty will remain in place for another year.

  • Alcohol duties will rise by 10.1% from August. However, tax paid on alcohol served in pubs will be frozen, meaning it will be up to 11% lower than tax levied on drinks purchased elsewhere.

  • Tobacco taxes will rise at a rate of 2% above inflation.

  • Marketing tax avoidance schemes will become punishable by prison sentence.

  Business
  

  • The main rate of corporation tax will still rise to 25% from April as planned.

  • Areas in the West Midlands, Greater Manchester, Liverpool and Teesside have been targeted as part of the government’s ‘levelling up’ initiative. Local authorities will have the chance to submit proposals around education, research and development, and if successful, they will be given £80 million in funding as well as tax incentives.

  • Businesses will be able to write off all investment costs against their tax liabilities. This is expected to save around £9 billion over three years.

  • Businesses involved in research and development will be granted an enhanced credit, effectively rebating £27 for every £100 invested.

  • A prize fund of £1 million per year will be available for innovation in the area of Artificial Intelligence.

  Energy
  

  • £20 billion will be invested in carbon capture and storage.

  • Nuclear energy will be re-classified as an environmentally friendly form of energy – this means that providers of nuclear power will have access to new investment incentives.

  Conclusion
  
  Overall, this is all great news, however we still need to wait for all of the rules to be published. The devil is, as they say, in the detail, so please do not take any action before speaking with your Financial Planner.

  If you do not currently have a Financial Planner please contact us and one of the team will be happy to help.