A quiet spring budget?
The Chancellor, Jeremy Hunt spoke for just over an hour today as he gave his first official budget. There had been several leaks ahead of the announcement and unlike many of his predecessors there were no ‘rabbits out of the hat’ as he spoke at the despatch box.
Although many will have seen it as a dull budget, given the economic climate, this was not unexpected and if anything, it was more upbeat than many had predicted with a cheerier economic forecast than last autumn.
The forecast is now more positive with the OBR indicating that we will not now see the UK fall into a technical recession, albeit growth is limited, but forecast to grow over coming years.
The Chancellor reiterated his four-pillar approach from the autumn statement that underpins the government’s plan for economic stability – enterprise, employment, education, and everywhere.
Throughout the measures that were announced, he repeatedly went back to stability and how to achieve growth alongside this. What was disappointing from a South West perspective is there is no specific investment for the region, with the Midlands and North of England being identified as all the areas for enhanced support.
So, what were the main points to take away from today’s announcements?
For businesses and individuals, the main points were:
- Confirmation that the main rate of Corporation Tax will increase to 25% from 1 April 2023 as planned. To soften the blow of this, the concept of fully expensing capital expenditure has been brought in to give businesses 100% tax relief on any level of qualifying expenditure for the next three years, with the intention this will be made permanent.
- Although in the autumn it had been confirmed that Research and Development reliefs would be scaled back for SMEs, today the relief for those R&D-intensive SMEs will be increased from approximately 18% to 24%. Again, to help those businesses involved in investment and delivering growth.
- To encourage individuals back into work and to avoid the disincentive for some in continuing to work due to pension charges, there were two changes: an increase in the annual allowance by 50% to £60,000 and the abolition of the lifetime pensions allowance.
- Although many of the measures are being deferred for a year or will take a year to be fully in place there will be an increase in free childcare and also an increase in allowances to encourage people back into work before allowances are withdrawn.
- For the pub trade, a reduction in the alcohol duty rate for draught beer will be a welcome relief, albeit only a small benefit for many struggling with spiraling costs.
- The political hot potato of how to provide energy support was also covered early on with the widely expected increase in the £2,500 energy cap extended for a further three months to the end of June 2023. What was disappointing for businesses though is there was no mention of any additional support for them.
All in all, while a quiet budget announcement for businesses, it does at least give stability and helps them plan. While no major tax cuts or handouts, there are certainly reasons to be positive and we are starting to see some signs for growth in the wider economy that should start to give us all some optimism for the coming year.