On Wednesday 15th March 2023, the Chancellor of the Exchequer, Jeremy Hunt, delivered his first Spring Budget. Widely referred to as the “Back to Work Budget”, Impact’s Hannah Walton-Hughes discusses the contents of the budget, and the effect it is likely to have on the cost of living and students.
Wednesday 15th March promised to be a highly significant day for both the country and the Conservative Party. Jeremy Hunt reached something of a milestone, judging against the longevity of his recent predecessors: his first Spring Budget.
The budget saw the government extending their help on energy for three further months
Perhaps the biggest challenge facing everybody at the moment is the rocketing price of energy bills. As expected, this budget saw the government extending their help on energy for three further months, until the end of June. This means government subsidies will continue to limit average household bills to £2,500 a year.
The 5p cut to fuel duty on diesel and petrol is also continuing; it had been expected to end in April, but will now carry on for twelve months.
the Chancellor announced that £20bn is to be invested in ‘low-carbon energy projects’
Climate change is a hugely significant challenge facing our planet at the moment. As part of a move towards more sustainable energy, the Chancellor announced that £20bn is to be invested in ‘low-carbon energy projects’, largely carbon capture and storage. This will be invested over the next two decades. In addition, more public funding will be going into producing nuclear energy, with this method now being classed as ‘environmentally sustainable for investment purposes.’
One of the biggest packages announced was regarding childcare
One of the biggest packages announced was regarding childcare. This was seen by the government as a key lever in helping parents get back into work, filling the increased labour shortages the country is currently seeing. The main measure will be staggered in release. From April 2024, in stages, thirty hours of free childcare will be made available to parents, extending to children of one and two years of age. New, more relaxed, rules have also been introduced, to allow childminders to care for more children.
Childcare is not the only way the government hopes to get people back to work. £63mn has been invested in schemes to encourage those over the age of fifty, who have retired, back to work. Universal Support, newly introduced, will provide a voluntary employment scheme for those in England and Wales on disability benefits.
Despite the Conservative Party’s recent hardline stance on illegal immigration, the Chancellor announced that, in 5 roles in the construction sector, immigration rules will be relaxed to reduce labour shortages.
Corporation tax will rise from 19% to 25%
In terms of business, despite various calls from backbench MPs, corporation tax will rise, as expected, from 19% to 25%. This will be paid by businesses earning ‘taxable profits’ over £250,000. Nevertheless, this will be somewhat offset by the option to deduct the investment companies make in new technology and investments, from these taxable profits. Twelve new Investment Zones are planned, with tax breaks to benefit them.
Perhaps the most controversial measure of the budget has been the government’s decision to remove the cap on how much people can accumulate in pension savings throughout their lives before they pay extra tax. This is currently set at £1.07mn. The government says that this is to curb the issue of doctors retiring from the profession early, due to tax issues with their pensions. However, the Opposition Labour Party have deemed the measure as a tax cut for the richest in society and has described it as the wrong priority at the current time, given how much working people are struggling.
Gareth David, a left-leaning MA student at the University of Nottingham told Impact that the budget “supports many people who don’t need it and fails to provide enough support for those who do.” “The budget is very much overshadowed by the current behaviour of the Conservatives.” To conclude, Gareth said that it felt “tentative”, and was made “by a Chancellor who knows his party is very disliked at the moment.”
The Office for Budget Responsibility predict that the U.K. will avoid a recession this year, but that the economy will shrink
The Office for Budget Responsibility (OBR) has given its verdict on the budget, and the state of the U.K. economy more generally. They predict that the U.K. will avoid a recession this year, but that the economy will shrink by 0.2%. Growth of 1.8% is predicted for next year, followed by 2.5% in 2025. Inflation is furthermore expected to drop significantly, to 2.9% by the end of 2023. Underlying debt as a percentage of GDP is thought to rise to 93.7% in the year 2024.
Other measures include increasing defence spending over the next 5 years by £11bn, investing in repairing potholes, and £10mn extra investment (over the next two years) in charities to assist with preventing suicide.
Alcohol taxes will rise with inflation from August
Offering reliefs for cider, beer and wine sold in pubs was another measure announced. Alcohol taxes will rise with inflation from August.
In terms of the overall impact of the budget on students, Benny Daniels, Training Coordinator of UON’s Debating Society, had a clear opinion. “As far as I can tell it literally doesn’t impact students. There is no rise in fuel duty but there hasn’t been for the last fourteen years of temporary freezes, and the price of a pint in certain pubs may or may not get marginally cheaper.”
Both the Prime Minister and the Chancellor will hope that this budget shows a government that, after years of volatility, is pursuing a path of stability and ambition. Whether others accept that remains to be seen.
Featured image courtesy of Christoper Bill via Unsplash. Image license found here. No changes were made to this image.
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