On 15th March 2023, Chancellor of the Exchequer Jeremy Hunt delivered his Spring Statement to Parliament. The measures announced in the statement aim to help with immediate cost-of-living pressures while facilitating a sustainable plan for long-term economic growth. According to Hunt, growth can be delivered by “removing obstacles that stop businesses investing, tackling labour shortages that stop them recruiting and breaking down barriers that stop people working.”
Detailed within the Spring Statement, the latest economic outlook from the Office for Budget Responsibility (OBR) revealed an improved position from November’s report. Specifically, the gross domestic product is expected to contract by just 0.2%, down from the OBR’s original prediction of 1.4%, with the UK now predicted to avoid a technical recession. However, the OBR cautioned that spending power is still forecast to drop by 6% over this fiscal year and the next, the largest two-year fall since Office for National Statistics began in the 1950s.
Measures for Individuals
The announced measures that impact individuals include the following:
- The Energy Price Guarantee has been extended until June 2023, and prepayment charges will be brought in line with comparable direct debt charges.
- The pension annual tax-free allowance has been increased from £40,000 to £60,000, and the Lifetime Allowance has been abolished.
- The free 30-hour child care for eligible working parents will be expanded to include children as young as 9 months from September 2025.
- The fuel duty has been reduced by 5p per litre, and its rate will be frozen for the next 12 months.
- A “returnerships” apprenticeship scheme will target older workers and help them return to the workplace.
- A more rigorous set of benefit sanctions will target those who fail to meet strict work-search criteria.
Measures for Businesses
The announced measures that impact businesses include the following:
- Corporation tax will rise from 19% to 25% from April 2023, affecting businesses with more than £250,000 in profits. Businesses with profits between £50,000 and £250,000 will get marginal relief.
- A new “full expensing” policy will be introduced—initially for three years—allowing companies to deduct eligible investments to lower their taxable profits.
- The Draught Relief will be extended from 5% to 9.2% to support the hospitality industry.
- £900 million in funding will help the UK create a new “supercomputer” to boost the artificial intelligence industry.
- Leisure centres will receive £63 million to help with rising operational costs.
- Twelve new “investment zones” will be created, designed to bolster innovation. There will be at least one zone in each of Scotland, Wales and Northern Ireland.
In his Spring Statement, Hunt announced a range of measures to support households and promote economic growth. However, while the OBR forecast now points to a more favourable economic outlook, consumer spending power will remain low for the foreseeable future. Consequently, it’s wise for both individuals and businesses to continue to brace for economic uncertainty and consider ways to cut costs.
Visit the government’s website to read the Chancellor’s statement in full. For further guidance and cost-cutting solutions, contact us today.