Jeremy Hunt looked to move on from having stabilised the economy with his autumn statement, to boosting its growth with his first full budget as chancellor.
Hunt’s aim here was to lay out plans that backed-up the economic parts of the prime minister’s five pledges from earlier in the year, as he name-checked reducing debt, tackling inflation and supporting economic growth as his priorities.
To great cheers from behind him, in a typically packed budget day chamber, Hunt announced that the OBR forecast was for UK GDP to contract by 0.2% in 2023 before picking up to 1.8% next year and to 2.5% in 2025.
The cheers were because this means the UK economy would avoid a “technical recession” this year. Hunt claimed his plan was working and that he was “proving the doubters wrong”.
However, it also forecast that disposable income would decrease by 5.7% over the next two years – the biggest fall since 1956-57.
Energy, enterprise, investment
As widely trailed beforehand, in a bid to help householders with their energy bills, the price cap was extended for a further three months at £2,500. It had been due to rise to £3,000 in April and the measure will save an average of £160 on bills.
Billed beforehand as the “back to work budget” Hunt also introduced measures to increase participation in the workforce to fill 1.1 million job vacancies, and to increase business investment.
Saying it would foster an “enterprise economy”, he argued the changes would give the UK the “best investment incentives of any advanced economy”, reports the Guardian.
“We tackle the two biggest barriers that stop businesses growing, investment incentives, and labour supply,” he said.
Investment zones
Hunt announced 12 new investment zones across the UK, saying they would recapture the spirit of the 1980s and bring the same boost achieved by developments such as Canary Wharf and Liverpool Docks did back then.
The zones, which will be given tax incentives and other benefits worth £80m each over five years, will be in areas which have traditionally struggled economically and will focus on industries such as technology, life sciences and creative industries, reports the FT.
Job Hunt
A raft of incentives to drive employment was topped by an extension of the 30 hours free provision of childcare for children from the age of nine months, compared with current provision which kicks in at three years old.
The move will be introduced gradually to allow supply to catch up but Hunt said it would be worth £6,500 a year to working families and save up to 60% of childcare costs.
Over 50s are being targeted as a source of experienced workers for firms with ‘returnership’ apprenticeships and bootcamps for older workers to help them develop new skills, as well as an extension of so-called ‘midlife MOTs’ from the DWP.
Corporation tax
Despite calls from his party to postpone the increase in corporation tax from 19% to 25% in April, it will go ahead, but the chancellor said this still amounted to the lowest tax regime in the G7 and that he wanted to help harness British ingenuity “to make us a science and tech superpower”.
A £9bn scheme will allow full capital expensing for the next three years and would be the most generous scheme in Europe, said Hunt.
The scheme allows 100% of qualifying capital expenditure in the UK to be written off against taxable profits in the year it is incurred.
The Telegraph reports that the move will try to take the sting out of the rise in corporation tax.
Green economy
The chancellor looked towards a greener future with a £20bn investment over the next 20 years in carbon capture, as part of his drive towards net zero.
He will use the money to back projects that will aim to store 20 to 30 million tonnes of CO2 a year by 2030 creating up to 50,000 skilled jobs.
Easing customs
While they didn’t feature in Hunt’s speech, the budget also saw a series of announcements to ease the burden on importers and exporters. The Spring Budget 2023 Customs Package is “intended to simplify customs import and export processes for traders, taking advantage of new freedoms following EU exit whilst at the same time upholding the UK’s high regulatory and security standards at the border.”
The IOE&IT Daily Update will publish further analysis of these measures later this week.
Labour response
Replying to the chancellor speech, Labour leader Sir Keir Starmer, accused the Conservatives of “cheap tricks from a government of gimmicks” that was resorting to “sticking plaster politics” and had “no real ambition” left.
He further claimed the budget showed the Tory store cupboard of ideas was as empty as our supermarket shelves.