Before the Spring Budget was announced, there were a lot of rumours circulating about what might be included. In his first statement as Chancellor, Jeremy Hunt overturned most of his predecessor Kwasi Kwarteng's September mini-Budget.
Back in November, three of the five priorities set out by Hunt and Rishi Sunak (in the 2022 Autumn Statement) directly addressed the economy. It outlined the ideas of halving inflation, boosting the economy (by generating better-paid employment), and ensuring that the UK's national debt was decreased.
In this article, we have included how these plans have progressed, some predictions we made before the announcement, as well as what we actually learned from the 2023 Spring Statement.
What is the Autumn Budget and Spring Statement?
The Autumn Budget and Spring Statement are both government announcements in the UK, setting out important financial plans and policies. Here are the main differences between the two:
- Timing: The Autumn Budget is typically delivered in October or November, while the Spring Statement is usually delivered in March.
- Scope: The Autumn Budget is a comprehensive fiscal event that sets out the government's taxation, spending, and borrowing plans for the upcoming financial year (as well as any longer-term fiscal strategies). The Spring Statement, on the other hand, is usually a shorter, less detailed announcement that provides an update on the government's overall economic position.
- Policy changes: The Autumn Budget is typically used to announce major policy changes, such as changes to tax rates, benefits, and public spending programmes. The Spring Statement, however, is used to update the public on the government's progress towards its previously announced goals, and to provide a preview of any policy changes that may be forthcoming.
- Scrutiny: The Autumn Budget is subject to detailed debate and scrutiny in Parliament, with opposition parties and interest groups given the opportunity to challenge the government's proposals and put forward alternative ideas. The Spring Statement is not subject to the same level of parliamentary scrutiny and is a more low-key event.
When was the 2023 Spring Statement?
Representing a critical moment in the UK’s financial year (which spans from April 1st to March 31st), this year’s Spring Budget was announced on March 15th 2023. As is tradition, the speech was read to parliament at around 12:30pm following the Prime Minister’s questions.
Considering the poor health of the UK economy, it represented an opportunity for the Chancellor to provide an update to the general public on what measures have been put in place and what has changed since November. Additionally, it was a chance to announce any other economic plans for 2023-24 and beyond.
The budget announcement always takes place in the House of Commons and is accompanied by a forecast from the Office for Budget Responsibility (OBR). These projections evaluate the effects of various policy choices made by the government as well as changes in the economy.
What is the Office for Budget Responsibility forecast?
The OBR is an independent organisation formed by the government in 2010 to offer analysis into the country's public finances. Its principal duty is to provide economic and fiscal predictions that inform the government's budget choices. The OBR ensures the government is held accountable and that independent/impartial projections are prepared.
Overall, OBR's projections are based on the most recent economic data and trends. They are used to influence government spending and taxing choices. The predictions include a variety of factors, including economic growth, inflation, governmental borrowing, and debt. The OBR prediction is a widely anticipated event on the UK economic calendar since it sheds light on the country's economic outlook and influences government policy.
What did we predict for the Spring Budget 2023?
In general, Spring Budgets often don’t contain any significant adjustments in policy, and Jeremy Hunt had already signalled his statement would be a "slimmed-down" financial plan. Nevertheless, considering the economic downturn, this Spring Statement was expected to include some significant announcements.
Hunt outlined new government borrowing and debt limitations in his 2022 Autumn Budget. As a result of these self-imposed objectives, the Chancellor wasn’t expected to announce any major spending drives since they are designed to signal fiscal responsibility to the markets. There was a lot of talk about lowering taxes to try to encourage economic development, but Hunt had previously declared it was doubtful they would be able to lower taxes at that moment.
Several sources reported the Chancellor would not be cutting taxes as part of the Spring Statement, despite pressure from Tory MPs. This followed the unveiling of various measures in the Autumn Budget which were anticipated to put a financial strain on many taxpayers beginning in April.
Due to the possibility of a recession, the Spring Budget was expected to be focused on how the government intended to carry out its growth objectives and assist companies/individuals with maintaining their current trajectory. Following November’s announcement there was still some uncertainty over which policies would be implemented. Here are a few of the predictions we made beforehand:
Business & property tax changes
In our annual Business Trends Report, 55% of business leaders asserted that their organisation’s main priority was growth. To put this in context, the main corporation tax rate will increase to 25% (as of April 1st 2023), making the United Kingdom a less desirable location for multinational corporations. To bring back predictability into the corporate planning process, the Chancellor might decide to pre-announce future tax cuts to corporation tax, perhaps spread out over five years.
As the government faces urgent cashflow demands, Hunt may decide to relax some regulations, broaden the tax base, or accept reduced revenue levels. It is possible that more initiatives will be revealed to entice firms to move to the UK. These may include the promotion of corporate re-domiciliation and the establishment of investment zones that provide tax breaks or subsidies.
A further possibility is specific enforcement action against the estimated 10,000 or more offshore corporations that possess UK residential property but failed to register with Companies House by the deadline of January 31st 2023 (and disclose the beneficial owners of the properties).
In January 2023, Hunt emphasised the significance of employment and the need to combat economic inactivity. This includes assisting people in finding employment and filling the openings in the labour market. In addition, he detailed plans to implement a pension system that promotes continuous labour engagement and assists more people with mental diseases and disabilities to find employment.
In the post-pandemic landscape, there are around 6.6 million people of working age who are not in full-time education or employment (and are therefore 'economically inactive’). Only around a quarter of these people are actively seeking employment. Hence, the Chancellor may include proposals concerning the reduced National Insurance contributions for returning workers as well as retraining funding.
Starting from April 6th 2023, the threshold at which the additional 45% income tax rate applies will be reduced from £150,000 to £125,140. Additionally, personal allowance and tax thresholds for basic income, National Insurance contributions, inheritance tax, and pension tax allowances will be frozen until April 2028.
With the Spring Budget, the government may consider increasing the income tax personal allowance and higher rate threshold, although this may not be possible due to the high cost. There will be reductions in dividend and capital gains tax allowances from April 2023. A new anti-avoidance measure will also be implemented, which deems non-UK companies acquired in exchange for UK company securities to be located in the UK for CGT purposes. The rates of income tax, CGT, and pension relief will remain unchanged.
In the spring of 2022, then-Chancellor Rishi Sunak proposed a 5p per litre reduction in petrol charges. This will conclude by the end of March 2023. Multiple think tanks have urged the government to assist individuals with managing their energy expenses. Currently, there are rumours that Hunt might extend this for an additional year to help with this.
On April 1st 2023, Energy Price Guarantee (EPG) will increase from £2,500 to £3,000 for the average annual household bill. This could impact households struggling to pay for gas and electricity. Conversely, the National Institute of Economic and Social Research has proposed a variable price cap based on energy usage. Still, the Chancellor has stated that households will unlikely receive additional energy bill support.
Fuel duty may be suspended for the foreseeable future to alleviate rising living costs. It was scheduled to increase by 12p per litre, however, this strategy might be abandoned. In addition, because the cost of energy assistance programmes may be less than expected, the Chancellor may use this underspend to lower the debt owed by the government (or finance investment incentives for businesses).
VAT & customs duty
In this budget announcement, the government may introduce a reduction or removal of VAT on goods related to combating climate change, such as green technology and electric vehicles. On top of this, the Chancellor may announce changes to customs duty (such as reducing or eliminating tariffs) to encourage UK businesses to import goods from countries other than the EU.
Pensions and benefits
The state pension age might rise to 68 by 2025/26. While it was initially projected to rise to 68 between 2044 and 2046, the government urgently needs to generate more revenue and lower expenditures.
What did we learn from the 2023 Spring Statement?
As expected, there was a big emphasis on boosting the economy by facilitating increased business investment and getting more people back in work. While there were also a range of measures put in place to counter issues related to fuel, energy, pensions, childcare, inflation, and corporation tax. Here are a few of the key announcements that were made on March 15th:
- OBR forecasts UK economy will shrink by 0.2% in 2023, but will narrowly avoid recession
- They also expect inflation to rate to fall to 2.9% over the course of the year
- The cap for the amount of pension savings people can build up before paying extra tax will be abolished
- The 5p cut to fuel duty on petrol on diesel kept for another year
- The government subsidies which limit household energy bills to £2,500 will be extended until the end of June
- £200m assigned for bringing prepayment meter energy charges in line with direct debit charges
- Corporation tax rate paid by businesses on profits over £250,000 to increase from 19% to 25%
- Tax breaks for 12 investment zones in the UK
- Less paperwork and more time for customs form submissions for international traders
- £63m assigned to programmes that will get retired people over 50 back to work
- New voluntary employment scheme called ‘Universal Support’ for disabled people
- Greater support for lead child carers on universal credit
Below you can find the Spring Budget 2023 government web page, as well as the BBC’s budget summary, which both provide insights into any new policies, taxes, and regulations that may affect your business. We have additionally included some other government resources so you can see how these policies have evolved over the past year:
- Spring Statement 2022
- Autumn Budget 2022
- Charter for Budget Responsibility: Autumn 2022
- Spring Budget 2023
- BBC Spring Budget Summary 2023
Be sure to also revisit this article throughout the financial year, as we will keep it updated and provide context whenever a new Spring Statement or Autumn Budget is announced.