What’s happening? Chancellor Jeremy Hunt will unveil his spring budget in this week’s meeting as he struggles with a cost of living crisisPublic sector strikes and slow economic growth are two of the reasons.
His announcement on Wednesday 15 March will reveal how much the government will collect in taxes and how they plan to spend it.
It comes following a turbulent ending to 2022 when Hunt’s predecessor Kwasi Kwarteng caused financial market turmoil with his disastrous September “mini budget”.
Hunt suggested that there are not enough tax cuts to make a difference in 2023-24, despite the brighter outlook. He is trying to stabilize public finances.
Yahoo News UK provides an overview of the 2023 spring budget.
Energy bills support
As many people struggle to afford heating and electricity, energy bills will be high on the agenda of the chancellor.
The government’s energy price guarantee, introduced in October, currently caps the cost of a unit of energy, with the average annual energy bill of a typical household at £2,500. This was set to increase to £3,000 in April.
A £400 subsidy to help families pay their bills, split over a six-month period, is due to end after March.
It remains to be seen if the government will follow through with its plan for reducing energy bill support for business, which has also been experiencing a challenging winter.
The £400 payment is not expected to be repeated.
Payroll in the public sector
Also, the government is under pressure to end ongoing strikes in the public sector by announcing a better pay package for workers.
It’s the next step ambulance worker strikes in England were called off The Unite union has agreed to pay negotiations with the government. This suggests that both parties are closer to a solution.
On the week of Budget Day, junior doctors took part on a three day walkout. Teachers, teachers, civil servants and university staff joined the picket line.
The Treasury had recommended that nurses, teachers and police officers be paid a 3.5% increase in their salaries. However, Sunak, Hunt and others are now considering a 5% increase to avoid further strikes.
The Bank of England warned that large increases in the pay of the public sector could fuel inflation. However, the government stated that a 5% increase would not be a risk.
According to the, workers may be eligible for backdated payments. Financial TimesEven though unions will not accept a lower inflation offer, they are likely to accept it.
Corporation tax is expected to be increased from 19% to 25%, although the current rate will still apply to profits below £50,000.
This is despite calls by the right-leaning Conservative party to reverse the change. Priti Patel, former home secretary, said that Hunt must “send positive signals to business” through his budget.
While supporters of keeping corporate tax low argue that it stimulates economic growth others are skeptical and the government is under pressure to boost public finances somehow.
Sunak, who was then chancellor, announced plans to increase corporation tax from 19% – 25% in his March 2021 budget. This was temporarily reversed however by Kwarteng.
At the time, Sunak said: “The government is providing business with over £100bn pounds of support to get through this pandemic so it is fair and necessary to ask them to contribute to our recovery.”
Retirees returning to work
In a recent speech, Hunt said there are 6.6 million “economically inactive” people in the UK, excluding students – one million of whom are aged between 50 and 64.
The chancellor is expected announce incentives for early retirees to go back to work to support businesses in labour shortages.
Offering tax incentives and tweaking the pension rules could be ways to get people back on the job market.
For example, Hunt could increase the lifetime pensions allowance – the maximum amount you can draw from pensions in your lifetime without paying extra tax – which is currently frozen at £1,073,100 until 2026.
As Britons adapt to a global energy crises, the chancellor is likely to suspend a planned 12p increase in fuel tax.
Current relief of 5p per litre – announced in the 2022 spring budget – is also likely to be extended for another year.
The move would cost the Treasury about £6bn per year, although this could be funded by an unexpected windfall of £30bn due to lower than expected public borrowing.
Since 1992, fuel duty has been kept at the same level for 12 years. Many Tories warn that the party’s future may be in jeopardy if it is raised.