A £27 billion tax cut for business and a trio of freezes to help families with the cost-of-living headlined the Chancellor’s Spring Budget
A £27 billion tax cut for business through radical ‘full expensing’ policy and capital allowances reform which will drive investment and growth.
- This government will simplify tax for SMEs with over 340,000 businesses in Scotland set to benefit.
- The broad shoulders of the UK mean that measures to ease cost-of-living burden will help more than halve inflation with the extension of Energy Price Guarantee kept at current level, and duties on fuel and a pub pint both frozen.
- Biggest ever set of reforms to remove the barriers that stop those on benefits, older workers, and those with health conditions who want to work from working.
- The government is launching the refocused Investment Zones programme to catalyse 12 high-potential knowledge-intensive growth clusters across the UK, including four across Scotland, Wales and Northern Ireland.
A £27 billion tax cut for business and a trio of freezes to help families with the cost-of-living headlined the Chancellor’s Spring Budget today, Wednesday 15 March.
Aimed at achieving long-term, sustainable economic growth that delivers prosperity with a purpose for the people of the United Kingdom, the Spring Budget breaks down barriers to work, unshackles business investment and tackles labour shortages head on.
Many of today’s decisions on tax and spending apply in Scotland, Wales and Northern Ireland. As a result of decisions that do not apply UK-wide, the Scottish Government will receive around an additional £320 million over 2023-24 and 2024-25.
Chancellor of the Exchequer, Jeremy Hunt said:
“Our plan is working – inflation falling, debt down and a growing economy.
“Britain is on a lasting path to growth with a revolution in childcare support, the biggest ever employment package and the best investment incentives in Europe.”
Scottish Secretary Alister Jack said:
“Today the Chancellor has set out a Budget which continues cost of living support and will deliver sustainable, long-term growth, helping us halve inflation and reduce our national debt.
“Maintaining the Energy Price Guarantee until June will save the average family £160 a year and gives certainty over their bills until summer. We’ve also made changes to Universal Credit to help people get back to work.
“Other UK Government direct investment in Scotland includes £8.6 million for Edinburgh’s world-class festivals, more than £1 million for five new vital community ownership projects, and investment in Scotland’s innovative high tech sector. The Chancellor has also confirmed there will be Investment Zones in all parts of the UK, building on Scotland’s two new Freeports.”
The Chancellor announced the government will pay the childcare costs of parents on Universal Credit moving into work or increasing their hours upfront, rather than in arrears – removing a major barrier to work for those who are on benefits. The maximum they can claim will also be boosted to £951 for one child and £1,630 for two children – an increase of around 50%.
The Chancellor went on to set out plans to continue to support households with cost-of-living pressures including keeping the Energy Price Guarantee at £2,500 for the next three months and ending the premium that over 4 million households pay on their prepayment meter, bringing their charges into line with comparable customers who pay by direct debit. Taken together with all the government’s efforts to help households with higher costs, these measures bring the total support to an average of £3,300 per UK household over 2022-23 and 2023-24.
To help household budgets further, the planned 11 pence rise in fuel duty will be cancelled and the 5p cut will be maintained for another twelve months, saving a typical driver another £100 on top of the £100 saved so far since last year’s cut.
The generosity of Draught Relief has also been significantly extended from 5% to 9.2%, so that the duty on an average draught pint of beer served in a pub both does not increase from August and will be up to 11 pence lower than the duty in supermarkets. The commitment to duty on a pub pint being lower than the supermarket has been termed the “Brexit Pubs Guarantee” by the Chancellor, and will support over 2,500 pubs and bars in Scotland.
The Chancellor also set out a comprehensive plan to remove the barriers to work facing those on benefits, those with health conditions and older workers. An increase in the pensions Annual Allowance from £40,000 to £60,000 and the abolition of the Lifetime Allowance will remove the disincentives to working for longer.
In line with the government’s vision for the UK to be the best place in Europe for companies to locate, invest and grow, a new first-in-Europe ‘full expensing’ policy will be introduced to boost business investment in an effective cut to corporation tax of £9 billion per year. This makes the UK the joint first most competitive capital allowances regime in the OECD and the independent Office for Budget Responsibility (OBR) forecast that this will increase business investment by 3% for every year it is in place. Mr Hunt signalled an intention to make this scheme – which covers equipment for factories, computers and other machinery - permanent when responsible to do so.
Accompanying forecasts by the OBR confirm that with the package of measures Mr Hunt set out today, the economy is on track to grow with inflation halved this year and debt falling – meeting all of Prime Minister Rishi Sunak’s economic priorities. This comes alongside the confirmation that there are no new tax rises within the Spring Budget.
Childcare
Significant reforms to childcare will remove barriers to work for parents receiving Universal Credit not working due to caring responsibilities, reducing discrimination against women and benefitting the wider economy in the process.
- Childcare costs of parents moving into work or increasing their hours on Universal Credit paid upfront rather than in arrears, with maximum claim boosted to £951 for one child and £1,630 for two children – an increase of around 50%.
Employment
The Chancellor set out a comprehensive plan to remove the barriers to work facing those on benefits, those with health conditions and older workers.
- Experienced workers such as senior doctors will benefit from an increase in the pensions annual allowance from £40,000 to £60,000.
- The Lifetime Allowance will also be abolished altogether, simplifying the tax system through taking thousands out of the complexity of pension tax and stopping over 80% of NHS doctors from receiving a tax charge for any additional hours worked.
- The midlife MOT offer will be expanded and improved to ensure people get the best possible financial, health and career guidance well ahead of retirement. There will be an enhanced digital midlife MOT tool and an expansion of DWP’s in person midlife MOTs for 50+ Universal Credit claimants, aiming to reach 40,000 per year.
- A DWP White Paper on disability benefits reform will herald the biggest change to the welfare system in the past ten years. By abolishing the Work Capability Assessment in Great Britain we will separate level of benefit entitlement from an individual’s ability to work.
- Strengthening work search and work preparation requirements for around 700,000 lead carers of children aged 1-12 claiming Universal Credit in Great Britain.
- Increasing the Administrative Earnings Threshold (AET), which determines how much support and Work Coach time a claimant will receive based on their earnings, for an individual claimant, from 15 to 18 hours at National Living Wage and removing the couples AET in Great Britain. Over 100,000 non-working or low-earning individuals will be asked to meet more regularly Work Coach support to move into work or increase their earnings.
- The application and enforcement of the Universal Credit sanctions regime will be strengthened, by providing additional training for Work Coaches to apply sanctions effectively, including for claimants who do not look for or take up employment, and automating administrative elements of the sanctions process to reduce error rates and free up work coach time.
- Elsewhere, international talent will be attracted through a new migration package that includes adding five construction occupations to the Shortage Occupation List.
Enterprise
The Chancellor put forward a plan to boost innovation, drive business investment and hold down energy costs.
- A ‘full expensing’ policy introduced from 1 April 2023 until 31 March 2026 and an extension to the 50% first-year allowance in the same period – a transformation in capital allowances worth £27 billion to businesses over five years.
- A £500 million per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits.
- Generous reforms to tax reliefs for the creative sectors will ensure theatres, orchestras, museums and galleries are protected against ongoing economic pressures and even more world-class productions are made in the UK.
- The Medicines and Healthcare products Regulatory Agency (MHRA) will receive £10 million extra funding over two years to maximise its use of Brexit freedoms and accelerate patient access to treatments. This will allow, from 2024, the MHRA to introduce new, swift approvals systems, speeding up access to treatments already approved by trusted international partners and ground-breaking technologies such as cancer vaccines and AI therapeutics for mental health.
- All of the recommendations from Sir Patrick Vallance’s review into pro-innovation regulation of digital technologies, published alongside Spring Budget today, are to be accepted.
- £900 million of funding for an AI Research Resource and an exascale computer – making the UK one of only a handful of countries to have one – and a commitment to £2.5 billion ten-year quantum research and innovation programme through the government’s new Quantum Strategy.
Levelling Up
To level up growth across the UK and spread opportunity everywhere, local communities will be empowered to command their economic destiny.
- Business rates retention expanded to more areas in the next Parliament.
- Deliver 12 Investment Zones across the UK including 4 across Scotland, Wales and Northern Ireland; support local growth projects in every nation of the UK.
- We will also provide £8.6 million of funding to support the Edinburgh Festivals, and £1 million for 5 community projects in Scotland, including Aberfeldy Sports Club in Perthshire, repairs to the Inveraray Pier, and a community grocery shop and cafe in the Kyle Lochalsh in the Highlands.
Notes to Editors:
- The Chancellor’s speech can be found here.
- Other documents published alongside the Spring Budget today can be found here.
- The OBR’s Economic and Fiscal Outlook verifies that the two fiscal rules outlined by the Chancellor at the Autumn Statement – that underlying debt must fall as a percentage of GDP by the fifth year of the forecast and that public sector borrowing must be below 3% of GDP over the same period – are met with buffers of £6.5 billion and £39.2 billion respectively.
[[Source]]: https://www.gov.uk/government/news/chancellor-unveils-a-budget-for-growth-to-benefiit-scotland
