Staff writer Daisy Eastlake considers the highs and lows of Jeremy Hunt’s Spring Budget announcements.
On March 15 2023, Chancellor of the Exchequer, Jeremy Hunt took to the dispatch box in the House of Commons to announce this government’s ‘Spring Budget’. Mr Hunt defined his most recent economic plan as being built upon the four ‘E’ pillars – Enterprise, Education, Employment, Everywhere. It was set to expand upon Sunak’s determination to improve growth and restore the economy.
What Mr Hunt Announced
Support on Energy Bills
Despite being scheduled to scale down from April 1, Mr Hunt announced that the Energy Price Guarantee – a scheme intending to protect the average household from increases in energy costs following independence from Russian gas and oil – will be maintained until June 2023. This is predicted to reduce the average energy bill for duel-fuel households to around £2,500 per year in Great Britain, and £2,109 per year in Northern Ireland.
The Office for Budget Responsibility (OBR), who analyse and keep check of the UK’s public finances, predict that the UK economy will not enter a recession, but will experience a period of contraction in 2023. It is important to know, however, that this contraction is currently forecast at 0.2%, rather than the much gloomier 1.4% predicted in November. After that, the economy is set to improve, aligning with Mr Sunak’s targets for reducing inflation.
Pensions & the Lifetime Allowance
Although an increase in Lifetime Allowance – the amount of money at which tax-free pensions are capped – from £1.07m to around £1.8m was expected, Mr Hunt went one step further and scrapped the Lifetime Allowance completely. This means that all money that is put into pensions will now be tax free, in response to the concerns that the taxes were pushing clinicians to retire early. The tax-free yearly allowance is also set to rise from £40k to £60k. These reforms mean that 80% of NHS clinicians will now have untaxed pensions.
“No one should be pushed out of the workforce for tax reasons”, announced the Chancellor.
Tackling Childcare Costs
Childcare costs have proven to be a real issue for many working families in Britain. Pregnant Then Screwed, a charity raising awareness for the disparities facing mothers in the workforce, identify that a reliance on “one of the world’s most expensive, dysfunctional childcare systems” widens the gap between working mothers and their colleagues, entrenching the maternity penalty.
The Chancellor announced that the availability of free, state-funded childcare will be extended to all working parents with children aged between nine months and four. This will be introduced in stages up to September 2026, and will be worth a total of £6.5bn.
Rising Corporation Tax
Mr Hunt announced that corporation tax will increase from 19% to 25%, meaning that firms which make a profit of more than £250k will pay 25% tax on their profits from April. The initial tax hike had been politically controversial – the initial opposition from the further right of the Conservative party had led Liz Truss to attempt to scrap the policy when releasing her mini-budget in September.
Despite the tax rise, Mr Hunt was quick to identify that only 10% of businesses would pay the full rate, and the UK would maintain the lowest rate of corporation tax in the G7. The policy is set to be in effect for 3 years at the minimum.
Disability Benefits
The Chancellor also clarified his reforms to disability benefits, with the release of a White Paper promising “ambitious and extensive reforms” set to allow people with health conditions the ability to continue to live free and independent working lives. The paper outlines a scrap of the Universal Credit Limited Capability for Work and Work Related Activity (LCWRA) – essentially, a work assessment for people receiving disability benefit. Mr Hunt also pledged that the government would invest more in employment support for disabled people, stepping up Work Coach support and rolling out the In-Work Progression Offer to help people off Universal Credit and into work.
“The declinists are wrong and the optimists are right. We stick to plan because the plan is working.” – Jeremy Hunt, Chancellor of the Exchequer
What He (Surprisingly) Hasn’t Announced
March 15 has also been termed the ‘Budget Day Strike’, as about half a million workers go out on strike over pay disputes – covering all sectors from junior doctors to university lecturers. This follows an onslaught of strikes which have affected a multitude of industries within the UK over the last few weeks, and has raised more and more pressing questions about the pay in the public sector.
Note what the Chancellor did not mention. Nothing on public sector pay. No mitigation of big income tax rises coming in this April. No more money for public services post 2024.
— Paul Johnson (@PJTheEconomist) March 15, 2023
Yet public sector pay was not in Jeremy Hunt’s spring budget. The Bank of England had warned that a pay increase could damage the government’s efforts to reduce inflation rates, so the tactical avoidance of mentioning it in the Commons is not entirely unexpected. But when the impact of strikes is hitting the UK general public harder now than ever, not addressing the issue feels like a somewhat ignorant move.
Facing the Opposition: “Britain Can’t Afford the Tories”
In true budget fashion, the Leader of the Opposition was given space to criticise the government for their new economic policies immediately after Mr Hunt’s hour-long statement had ended. Labour leader, Sir Keir Starmer accused the budget of being a “sticking plaster” for a country in need of “major surgery” , arguing that the issued proposals leave the UK lagging behind their European counterparts, and placing the UK once again as “the sick man of Europe”. Arguing that the Conservative progression away from recession was instead a polished disguise for economic stagnation, Labour were quick to point to the IMF’s predictions that the UK would be the worst performing country in the G7 this year.
Labour weren’t the only party with holes to pick. Stephen Farry of the Alliance party identified that Northern Ireland is facing budget cuts after the Chancellor’s announcement, to which he was half-reassured, half-palmed off with the claim that the Northern Ireland Secretary, Chris Heaton-Harris, is working with the Alliance party on these issues. Similar tunes were sung to the complaints of the Scottish National Party (SNP).
Compared to the Kami-Kwase announcement in September, this budget seems to be a breath of fresh air. However, it’s failure to address public sector pay when strikes are becoming the ever-louder elephant in the economic room appears neglectful. For those out marching today, this Spring Budget falls short of demands once again.
