by What’s up? Chancellor Jeremy Hunt is preparing to present his spring budget this week as he grapples with a cost-of-living crisis, public sector strikes and sluggish economic growth.
His announcement on Wednesday March 15 will show how much money the government intends to take in taxes and how it intends to spend it.
There follows a turbulent end to 2022, with Hunt’s predecessor Kwasi Kwarteng sending the financial markets into turmoil with his disastrous September “mini-budget”.
Although the outlook for 2023-24 looks slightly better, Hunt has indicated there is little scope for “significant” tax cuts as he seeks to stabilize public finances.
Here Yahoo News UK explains what to expect from the spring 2023 budget.
Support for energy bills
Energy bills will be high on the Chancellor’s agenda as households across the country struggle to pay for heating and electricity.
The government’s energy price guarantee, introduced in October, currently caps the cost of a unit of energy, with the average annual energy bill for a typical household being £2,500. This should rise to £3,000 in April.
A £400 grant to help families pay their bills, spread over a six-month period, is due to expire after March.
However, Chancellor and Prime Minister Rishi Sunak are under pressure to maintain current support levels, according to The Times, meaning they are expected to turn around and cap energy bills at their current levels until July.
It remains unclear whether the government will go ahead with its plan to reduce support for energy bills for companies that have also endured a challenging winter.
The £400 payment is not expected to be repeated.
pay in public service
The government is also under pressure to end the ongoing and widespread public sector strikes by announcing a tougher wage deal for workers.
It comes after ambulance workers’ strikes in England were called off by union Unite to start wage talks with the government, suggesting both parties are one step closer to a solution.
However, during Budget week, young doctors took part in a three-day strike over conditions and pay – with Budget Day dubbed “Strike Wednesday” as young doctors, teachers, civil servants, subway workers and university staff attended took part in the picket .
The Treasury had recommended a 3.5% pay rise for nurses, teachers, police officers, dentists and doctors but it is believed Sunak and Hunt are now considering 5% to prevent further strikes.
Although the Bank of England has warned that large increases in public sector wages could fuel inflation further, the government is understood to have said a 5% increase was “low risk”.
According to the Financial Times, workers can even get retroactive payments, although unions are unlikely to be happy with another bid below inflation.
Corporation tax
Corporation tax is expected to increase from 19% to 25%, although the current tax rate will still apply to profits under £50,000.
This is despite calls from the right-wing Conservative Party to reverse the change, with former Home Secretary Priti Patel saying Hunt must “send a positive signal to the economy” in his budget.
Advocates of a low corporate tax argue that it will stimulate economic growth, but others are skeptical and the government is under pressure to somehow bolster public finances.
When he was chancellor, Sunak announced plans in his March 2021 budget to raise corporate income tax from 19% to 25%, which was temporarily reversed by Kwarteng.
At the time, Sunak said: “The Government is providing over £100billion in support for businesses to get through this pandemic so it is fair and necessary to ask them to help us recover.”
Getting retirees back to work
In a recent speech, Hunt said there were 6.6 million “economically inactive” people in the UK, excluding students – a million of whom are aged between 50 and 64.
The Chancellor is expected to announce incentives for these early retirees to return to work to help companies facing labor shortages.
Methods to lure people back into the labor market could include offering tax incentives or streamlining pension rules.
For example, Hunt could increase the lifetime pension subsidy – the maximum amount you can take out of pensions in your lifetime without paying extra tax – which is currently frozen at £1,073,100 until 2026.
fuel obligation
As Brits continue to brace themselves for a global energy crisis, the Chancellor is expected to put on hold a proposed 12p increase in fuel taxes.
The current relief of 5p a liter – announced in the Spring 2022 Budget – is also likely to be extended by a further year.
The move would cost the Treasury about £6bn a year, although this could be funded by an unexpected £30bn windfall from lower-than-expected public borrowing.
The fuel tax has not been increased for more than 12 years and many Tories have warned that the future of the party could be at stake if an increase were to take place.
