Christie & Co comment on the 2023 Spring Budget

Key takeaways 

• The economy is forecast to grow by 1.8% in 2024 and 2.5% in 2025, according to Office for Budget Responsibility forecasts 
• Aims to reduce inflation rates to 2.9% by the end of this year 

Employment – focus on bringing early retirees and long-term sick back into the workforce 

• Pension tax reform introduced to tackle the 6.6 million working aged adults in the UK who are classed as economically inactive – increasing the pensions annual tax-free allowance from £40,000 to £60,000 and will abolish the £1.07 million lifetime allowance  
• New “returnship” programmes and sector-based work academies also introduced to encourage over 50s who have retired early to return to work 
• Enhancing the DWP’s mid-life MOT strategy by increasing the number of 50+ Universal Credit claimants from 8,000 to 40,000 a year 
• An additional 2.5 million economically inactive people are classed as long-term sick, who will be encouraged to return to work 
• A Health and Disability white paper to be introduced called Universal Support which will allow for disabled people to work part-time and still be able to claim benefits – providing 50,000 places on new voluntary employment scheme 
• 1.7 million people inactive due to inadequate childcare support – newly introduced childcare reforms will see this number decrease 
• Children in care should be given all possible help to make a normal working life possible when they reach adulthood, so Hunt is nearly doubling the Qualifying Care Relief threshold to £18,140 which will mean a tax cut for a qualifying carer averaging £450 a year. He is also increasing funding for the Staying Close programme to help more care leavers into work 

 

Energy bills support 

• The Government’s Energy Price Guarantee for households will be extended for another three and a half months  
• Support for businesses will be reduced  

 

Fuel duty cuts 

• The 5ppl fuel duty cut has been extended for a further year 
• Fuel duty was set to rise by RPI inflation in April and temporary 5p duty cuts currently in place were due to expire this month, meaning cost of fuel duty would have risen by 23% - an extra 12p per litre.  This 5p duty cut has been maintained for a further 12 months 

 

Corporation tax rise / super deduction replacement 

• 6% rise in corporation tax scheduled to take effect in April despite warning from business lenders it will delay growth, which will bring tax rate up to 25% – this will mainly impact businesses with over £250k profit 
• Companies with profits between £50k - £250k will receive marginal relief  
• The corporation tax super-deduction, which allows businesses to cut their tax bill by 130% of the value of qualifying investment, will end on 31 March  
• Introduced full capital expensing for the next three years which is expected to increase business investment by 3% each year it’s in place 

 

Business growth and investment  

• Announcement of 12 investment zones which will receive £80 million in funding over five years including tax reliefs including one in Scotland, Wales and Northern Ireland 
• £20 billion investment over the next 20 years in carbon capture as part of a drive towards net zero – this is also estimated to create 50,000 jobs 

 Education 

• Those wanting to be a childminder will receive £600 for signing up or £1,200 if they sign up through an agency 
• The Chancellor said he'll increase the funding to nurseries by £204m from this September rising to £288m next year - an average of 30% increase in the two-year-old rate 
• Changing ratios from 1:4 to 1:5 for 2-year-olds in England. This is optional  
• Parents on Universal Credit will now receive up to £951 for one child and £1,630 for two children per month which will now be paid upfront 
• The Government will fund schools and local authorities to increase supply of wraparound care so all parents of school-age children can drop their children off between 8am and 6pm. The ambition is that all schools will start to offer a wraparound offer, either on their own or in partnership with other schools, by September 2026 
• Where all adults are working at least 16 hours, 30 hours of free childcare for children over nine months. Staged introduction – working parents of two-year-olds be able to access 15 hours from April 2024, Sept 2024 it will be extended to children of nine months up, in September 2025 this will go up to 30 hours free childcare 

 

Hospitality 

• Brexit Pubs Guarantee has been introduced – to ensure the duty on draught products in pubs will be up to 11p lower than in supermarkets from the 1 August this year 

 

Enterprise 

• The climate change relief scheme to be extended for two years 
• Nuclear power will be classed as environmentally sustainable – so will get same incentives as renewable energy 
• Launch of Great British Nuclear – which the Government aims will provide ¼ of our electricity by 2050 
• Strengthen our position in AI positions with the launch of the AI sandbox, helping innovators getting products to market 
• Annual £1m award for a person/team with the best innovation ideas – the Manchester prize 

 

See what our experts have to say in response... 

 Courteney Donaldson, Managing Director – Childcare & Education, comments: 

“Increased funding in the education sector, and early years specifically, has been long-anticipated, following years of lobbying, so it’s encouraging that the Chancellor has reported that funding for nurseries will rise in the next few years, and that there will be a boost to the financial support received by parents of children aged from nine-months. However, both reforms will need to be accompanied by a clear strategy detailing how this funding is to be deployed before it can be understood whether or not costs allocated will meet the rising costs the sector is still facing and whether said funding is sufficient for childcare settings to be sustainable. We expect those that deliver high-quality childcare will welcome the opportunity to pay staff more and retain current ratios if government funding is sufficient to cover the cost of delivery, rather than rush to reduce ratios.” 

 “The sector will very much welcome this new ‘returnship’ workforce strategy which, we hope, with campaigns such as NDNA’s First Five Years Count - which highlights the importance of working in the early years sector - will encourage more workers into this key sector.” 

 

Stephen Owens, Managing Director – Pubs & Restaurants, comments: 

“Whilst the sector might have hoped for ongoing energy bills support, VAT reduction and a reform to business rates in today’s budget, the more positive economic outlook and easing of inflationary pressures, alongside the extension to energy bill support for households outlined in today’s budget can only be good news for pubs and restaurants. This should help to maintain consumer confidence and provide people with more money for discretionary spending. Likewise, the beer duty freeze in pubs has been welcomed for the sector, as this will help operators compete with supermarkets and retailers. 

“The new 'returnship' scheme aimed at encouraging over 50’s back into the workforce could be a great opportunity for the sector to tackle staffing issues and we encourage operators to look into their eligibility for the relevant programs.” 

Steve Rodell, Managing Director – Retail, comments:

“The lack of any further incentives to purchase an electric vehicle (EV) in today’s Budget statement was certainly a missed opportunity, however the Chancellor’s decision to extend the 5ppl fuel duty cut for another year has been widely welcomed by the retail sector, as petrol and diesel prices remain fraught due to the ongoing war in Ukraine. Alongside this, his decision to extend support for energy bills should ease some of the burden on households and give them more spending power, which is a positive for retailers.

“The new 'returnship scheme' could also be a great opportunity for the retail sector and we advise retailers to look into the various programs.”