The Chancellor’s Autumn Statement and the accompanying economic forecasts from the Office of Budget Responsibility in November 2022, portrayed an incredibly bleak economic future for the UK. A real household disposable income fall of 7.1% was predicted amidst both a cost of living and energy crisis sweeping across the UK.
While forecasts and the outlook for the UK economy look slightly more optimistic in the first few months of 2023, Jeremy Hunt will have to wrangle with some incredibly challenging issues facing the vast majority of households in the UK.
On Wednesday, the Chancellor will outline his Spring Budget, below we look at some of the measures he may explore:
The energy crisis has dominated the headlines and lives of the public for the last six months. With the energy price cap on electricity and gas set to rise in April, the Chancellor is expected to extend the cap for another three months. This is likely to be paired with a package of support for those using prepayment metres rather than paying through direct debit.
In a bid to get more people into the profession, Jeremy Hunt is expected to announce a financial incentive of £500 for people who become childcare workers, as part of a new pilot scheme. With the aim of driving down the cost of childcare amid economic uncertainty, the Chancellor is also expected to increase the cap on the number of children a childcare worker can look after from four to five.
It has been widely reported that the Chancellor will introduce subsidies for Small and Medium Size Enterprises (SMEs) in a bid to cut down on the UK’s economically inactive and support those suffering from long-term illness. These could be in the form of “annual health appraisals” for employees ensuring preventative care is placed at the forefront of the UK’s health policy agenda.
In a further bid to ensure productivity in the workforce, the Chancellor is anticipated to announce an increase in the lifetime allowance on tax free pensions savings alongside the £40,000 cap on annual contributions in an effort to incentivize people to remain in the workforce and not take early retirement.
Levelling Up and Devolution
It has been reported that the Chancellor will devolve a swathe of budget powers to regional mayors in the West Midlands and Greater Manchester across areas such as transport, housing and education. The Chancellor will also reportedly build on his predecessor’s plans for regional ‘investment zones’ where companies can enjoy tax breaks and lower business rates.
Rishi Sunak has this week been in California where he met with Is American and Australian counterparts, announcing an increase in defence spending by £5bn over the next two years. Despite this being just half of the budget requested by Defence Secretary, Ben Wallace, Hunt is expected to pledge a £33m package to help war veterans adjust to civilian life.
In a move that could cause significant consternation on the Tory backbenches, it is reported that Jeremy Hunt will go ahead with a planned increase in corporation tax from 19 per cent to 25 per cent.
It remains to be seen whether the package of financial measures will move the dial on the public’s perception of the UK economy. The latest Ipsos Issues Index ranks the economy and inflation as the two most important issues facing Great Britain today according to the public and the Chancellor has the unenviable job of balancing the country’s books during a cost of living crisis and following a once in a century global pandemic. However, from reported measures he is set to put in place, the Chancellor looks set to focus on a plan revolved around ensuring people have access to and can remain in the workforce for as long as possible.