UK: What to Expect from the Spring Budget 2023 that will be delivered by Jeremy Hunt as the second fiscal statement of his time as Chancellor.
Jeremy Hunt will shortly deliver the second major fiscal statement of his time as Chancellor amid intense pressure to cut taxes.
Falling energy prices and higher-than-expected tax revenues mean that the outlook for Mr Hunt’s Spring Budget is becoming a little less bleak.
The Institute for Fiscal Studies, a think tank, estimates that borrowing this year and next will be £30bn less than previously expected.
Here’s what to expect:
Mr Hunt will deliver his Spring Budget in Parliament on Wednesday 15 March.
His statement is likely to focus on the Government’s aims to halve inflation, reduce public debt and boost economic growth.
It will be accompanied by the latest economic and fiscal outlook from the OBR, the Government’s spending watchdog.
Mr Hunt’s primary focus with the Spring Budget will be to get Britain back to work.
Excluding students, there are 6.6 million working aged adults who are classed as economically inactive.
The number of people neither working nor looking for a job has jumped by more than half a million people in the last three years.
Treasury officials believe the number of people out of work is a major barrier to economic growth.
Not only is it a problem for productivity, it is also fuelling inflation. A lack of staff is forcing employers to pay higher wages to attract people, which in turn is driving up prices.
The Government is looking at expanding its “midlife MOT” scheme to offer financial health checks to 50 to 64-year-olds.
Another option could be providing a tax incentive by lifting the pension lifetime allowance for senior doctors.
Another 2.5 million economically inactive people are classed as long-term sick and Mr Hunt also wants to get many of this group back into work.
Another policy option is to reboot the benefits system, so that sick people who return to work part-time can continue claiming some sickness benefits.
A further 1.7 million are parents who are staying at home to look after their children.
The Government’s Energy Price Guarantee, which caps energy costs for households, is scheduled to rise from £2,500 to £3,000 on April 1.
Support for businesses will also become more targeted.
Campaign groups such as Citizens Advice and business lobby groups have urged the Government to extend support to help protect the economy from still-high energy costs.
Although energy prices are falling, households will see their energy bills spike by several hundred pounds this year as the government support is tapered.
The Government is under pressure to commit to a stronger public sector pay deal to bring an end to the continual flow of strikes that are plaguing public services.
“A resolution will likely feature a stronger pay deal in 2023-24,” said Mr Raja.
At the moment, existing departmental budgets will allow for a 3.5pc public sector pay rise. Mr Hunt may go further and announce a 5pc increase. This would cost £4bn, according to Deutsche Bank.
The Chancellor will be wary of working in opposition to the Bank of England, which is raising interest rates to tame inflation and has warned that large pay settlements could fuel price rises.
However, the Treasury has reportedly concluded that a 5pc increase for the public sector would carry a “low risk” of contributing to protracted high private-sector pay growth. There is even talk of backdating the payment.
Despite warnings from a chorus of business leaders that higher taxes will hamper growth, Mr Hunt will almost certainly forge ahead with the planned rise in corporation tax rise scheduled to take effect from April.
The change, first announced by Rishi Sunak in his 2021 Spring Budget as chancellor, will see businesses face a six percentage point increase in the corporation tax rate, which will climb from 19pc to 25pc.
The full force of this tax rise will hit businesses with profits of more than £250,000. Companies with profits of between £50,000 and £250,000 will get marginal relief.
For those with profits of less than £50,000, there will be no change – they will continue to pay corporation tax at 19pc.