STA Update: UK Government Spring Budget 2023 Statement – Highlights for Businesses
The UK Government has today, Wednesday 15th March, announced its Spring Budget 2023. Read the full statement here.
A summary of the statement, including headlines for businesses, is highlighted below:
•Office for Budget Responsibility (OBR) predicting the UK will not enter a technical recession this year due to changing international factors and action taken by the UK Government.
•OBR forecasts inflation will fall to 2.9% by the end of 2023.
•Barnett Consequentials £320m for Scotland.
•£8.6m targeted funding announced for Edinburgh festivals.
•Cloddach Bridge in Moray to receive £1.5m for repairs.
•Creation of 12 Investment Zones – at least one zone to be in Scotland. Zones will benefit from tax breaks, each backed by £80m over five years. 12 zones will be created – eight in England, and four across Scotland, Wales and Northern Ireland.
•From 1st August, the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.
•Fuel duty will be frozen and a 5p reduction will be maintained for a further year.
•Every pound a business invests in IT equipment, plant or machinery will be able to be deducted in full and immediately from taxable profits.
MAIN SUMMARY
Opening comments:
• “A budget for growth.”
• The International Monetary Fund says the UK Government approach means “the UK economy is on the right track.”
• British economy that is “proving the doubters wrong.”
• Forecasts show the UK will meet the Prime Minister’s priorities “to halve inflation, reduce debt and get the economy growing.”
• Promises “long term, sustainable, healthy growth that pays for our NHS and schools, finds jobs for young people, and provides a safety net for older people, all whilst making our country one of the most prosperous in the world.”
• High inflation the “root cause” of the strike action.
Economic forecast:
• Office for Budget Responsibility (OBR) predicts the UK economy will contract by 0.2% this year but will not enter a technical recession due to changing international factors and action by the UK Government (i.e. will avoid two quarters of negative growth in a row).
• The UK economy is expected to grow by 1.8% in 2024; 2.5% in 2025; 2.1% in 2026; and 1.9% in 2027.
• OBR forecasts inflation will fall to 2.9% by the end of 2023.
Energy:
• The £2,500 average household cap on energy bills is set to continue from April to June under the Energy Price Guarantee – worth £160 in total for a typical household. It has been confirmed that the £400 winter discount will still end on 31st March.
• No energy support for business announced.
• £63m fund to help leisure centres in England with swimming pools meet energy costs.
• Pre-payment meters charges to be brought in line with comparable direct debit charges.
Business tax and claims:
• Corporation tax for businesses to increase from 19% to 25% as planned. Those making a profit over £250,000 will pay 25% tax on their profits from April.
• Announcement of “full expensing” – every pound a business invests in IT equipment, plant or machinery will be able to be deducted in full and immediately from taxable profits. To be available for at least the next three years, but the plan is for it to be made permanent.
• Small or medium-sized businesses that spend 40% or more of their total expenditure on Research and Development will be able to claim a credit worth £27 for every £100 they spend.
• The UK Government will extend temporary higher rates of theatre, orchestra, and museums and galleries tax reliefs for two further years from April 2023.
Levelling up:
• Creation of 12 Investment Zones – at least one zone to be in Scotland. Eight Investment Zones have been announced in England, and four across Scotland, Wales and Northern Ireland. Zones will each be backed by £80m over five years, including tax reliefs and grant funding. Each cluster will drive growth in key future sectors and bring investment to the local area.
• Also, announcement of the rollout of new Levelling Up Partnerships, providing £400m of investment in 20 areas of England.
• £8.6m announced for Edinburgh festivals. The Budget document states that funding “could help build a permanent headquarters for the Edinburgh Fringe Festival and create year-round opportunities for local artists and talent across Edinburgh festivals.”
• Cloddach Bridge in Moray to receive £1.5m for repairs.
• £1m for five community projects in Scotland, including Aberfeldy Sports Club in Moray, repairs to the Inveraray Pier, and a community grocery shop and cafe in the Kyle Lochalsh in the Highlands (Note: this was not mentioned in the Spring Budget document, but a separate communication received from HM Treasury)
Duty freeze:
• “A Brexit pubs guarantee” – From 1st August, the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.
• Fuel duty will be frozen and a 5p reduction will be maintained for a further year. Expected to save the average driver £100 next year.
Government debt:
• UK Government says it is on track to reduce debt. Underlying debt will be 92.4% of GDP by next year, falling every year after until 2027-28.
• Underlying debt in three years’ time is forecast to be lower than it was in the autumn of last year.
• Stated public sector net borrowing must be below 3% over the same period. OBR confirmed that rule is being met, with a buffer of £39.2bn.
• Public sector borrowing is expected to fall from 5.1% in 2023-24 to 1.7% 2027-28.
• As a result, the Chancellor says the UK can expect a “slightly lower tax burden.”
Transport:
• Second round of the city region sustainable transport settlements announced, including an additional £200m to tackle potholes in England.
Work and pensions:
• ‘Returnerships’ announced, which will promote existing skills interventions to over-50s, focussed on flexibility and previous experience to reduce training length. This will be supported by 40,000 new Sector-Based Work Academy Programme placements across 2023-24 and 2024-25 in England and Scotland.
• The UK Government will offer 30 hours of free childcare for every child from the age of nine months in England, where all adults in the household work.
• UK Government will fund schools and local authorities to increase supply of wraparound care in England.
• UK Government White Paper to be published on disability benefits, including plans to abolish the work capability assessment and to separate benefits entitlement from an individual’s ability to work.
• Pensions lifetime allowance to be abolished.
• Pensions annual tax-free allowance to be increased from £40,000 to £60,000 and will abolish the Lifetime Allowance – previously set at £1.07m.
• 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.
Environment:
• Nuclear power will be classed as “environmentally sustainable” and given the same access to investment incentives as renewable energy.
• “Great British Nuclear” to be launched aimed at bringing down the costs of producing nuclear power.
• Competition to be launched for small modular reactors.
• £20bn of support for the early development of carbon, capture, usage and storage.
