A £27 billion tax cut for business to drive investment and growth featured among the headlines of Jeremy Hunt’s Spring Budget.
A ‘full expensing’ policy introduced from 1 April 2023 until 31 March 2026 and an extension to the 50 per cent first-year allowance in the same period is a transformation in capital allowances which will benefit businesses over three years.
Aimed at achieving long-term, sustainable economic growth that delivers prosperity, the Spring Budget focused on breaking down barriers to work, unshackling business investment and tackling labour shortages head on.
Chancellor of the Exchequer, Jeremy Hunt said: “Our plan is working – inflation falling, debt down and a growing economy.
“Britain is on a lasting path to growth with a revolution in childcare support, the biggest ever employment package and the best investment incentives in Europe.”
The Chancellor announced 30 hours of free childcare for every child over the age of nine months, with support being phased in until every single eligible working parent of under 5s gets this support by September 2025.
The Government will also pay the childcare costs of parents on Universal Credit moving into work or increasing their hours upfront, rather than in arrears – removing a major barrier to work for those who are on benefits. The maximum they can claim will also be boosted to £951 for one child and £1,630 for two children – an increase of around 50 per cent.
The Chancellor went on to set out plans to continue to support households with cost-of-living pressures, including keeping the Energy Price Guarantee at £2,500 for the next three months and ending the premium that over four million households pay on their prepayment meter, bringing their charges into line with comparable customers who pay by direct debit.
Taken together with all the Government’s efforts to help households with higher costs, these measures bring the total support to an average of £3,300 per UK household over 2022-23 and 2023-24.
Fuel duty rise cancelled
To help household budgets further, the planned 11 pence rise in fuel duty will be cancelled, maintaining last year’s 5p cut for another 12 months, saving a typical driver another £100 on top of the £100 saved so far since last year’s cut.
The Chancellor also set out a comprehensive plan to remove the barriers to work facing those on benefits, those with health conditions and older workers.
An increase in the pensions Annual Allowance from £40,000 to £60,000 and the abolition of the Lifetime Allowance will remove the disincentives to working for longer.
A new ‘Returnerships’ skills offer for older workers and more stringent Universal Credit job search requirements also feature in the plan that will boost the UK’s workforce, fill vacancies and support economic growth.
Boost for business growth
In line with the government’s vision for the UK to be the best place in Europe for companies to locate, invest and grow, a new policy of ‘full expensing’ will be introduced for the next three years to boost business investment in an effective cut to corporation tax of £9 billion per year. This makes the UK the joint most competitive capital allowances regime in the OECD and the only major European economy to have such a policy.
The independent Office for Budget Responsibility (OBR) forecast that this will increase business investment by three per cent for every year it is in place. Mr Hunt signalled an intention to make this scheme – which covers equipment for factories, computers and other machinery – permanent when responsible to do so.
Accompanying forecasts by the OBR confirm that with the package of measures Mr Hunt set out, the economy is on track to grow with inflation halved this year and debt falling – meeting all of Prime Minister Rishi Sunak’s economic priorities.
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