James Pinchbeck, partner at Streets Chartered Accountants, reflects on the Spring Budget.
Listening to the Chancellor Jeremy Hunt’s Spring Budget you might have been left with the sense that it set out to address everything for everyone, everywhere here and now. Delivered with the news that inflation seems to be on target to being more than halved by the end of the year and that the UK has technically avoided a recession, the Chancellor did appear ebullient in terms of future prospects for the UK economy and growth.
Early on in his speech it was good to hear about the proposed £100m support for local charities, recognition of the vital work and role our third sector plays in supporting our communities. So too was the news around the provision of £63m to be made available for public swimming pools and leisure centres, all of which play a key part for many in ensuring physical and mental health and wellbeing. When it came to the cost-of-living crisis all will no doubt have been pleased to hear that the energy price cap for households will remain in place for a further 3 months, with the start of the summer expected to see a reduction in real terms in the cost of energy.
Motorists will have welcomed the continuation of the 5p fuel duty freeze and for those that like a pint down the pub, the 11p reduction in alcohol duty on a draught pint has probably gone down a treat.
Moving on to what the Budget 2023 means for business and enterprise, Mr Hunt did not, as many might have hoped, seek to cancel the forthcoming increase in Corporation Tax from 19% to 25% this April. In part he indicated that the lower rate actually hadn’t had the impact or desired outcome in terms of stimulating economic growth or rewarding or incentivising enterprise.
He did however, seek to harness the upside of Super Deduction, the tax relief which was due to come to an end this April, with the introduction of full capital expensing for the next three years, with the intention of making this permanent. Under this relief, IT, plant and machinery will be deductible in full from taxable profits.
Looking to support the life science and creative sectors, an enhanced credit is set to be introduced whereby for every £100 spent on R&D, eligible companies would be able to claim £27 back. Further tax relief and support is also being introduced for SME’s who undertake more intensive R&D, especially in the fields of life science, healthcare and artificial intelligence.
When it comes to barriers to economic and business growth one of the key challenges many businesses face is a workforce and labour shortage. Whether keen to help businesses address this issue or to reduce the growing number of people who are classed as economically inactive, the Chancellor announced a number of measures aimed at targeting and supporting, at one end, those with health-related issues and child care challenges and at the other end, encouraging those aged over 50 back to the work place. With regard to the latter, a key area of focus was seeking to address the shortage of health care professionals who might have left the profession as they have reached the pension threshold and felt continuing was not financially attractive or beneficial.
Measures to boost the workforce then saw financial support and incentives for those seeking child care provision and more flexibility for nurseries and child minders as providers. Schools are also being encouraged to provide greater wrap around cover for childcare at the start and end of a working day.
When it comes to those over 50 who may have left the workplace, the Chancellor chose to increase the annual pension allowance from £40,000 to £60,000 and remove the life time allowance, the maximum a person may have in a pension pot. With this, along with the rising costs of living and a sense that many might now want to do something, he hopes that people will seek work, even if it is not necessarily what they used to do. To support them he is also looking to introduce apprenticeships for the over 50s helping them to re-train and up skill.
Whether the measures announced will help to fill vacancies will no doubt depend on the ability to match skills with jobs, especially in those sectors with particular challenges such as healthcare, education, tourism, hospitality and even the professions like accountants and solicitors.
Finally, it was interesting to hear about the creation of 12 new investment zones including those planned for the West Midlands, East Midlands, Teesside, South and West Yorkshire along with the proposed £400m for further levelling up partnerships. Such initiatives do appear to be, in part, underpinned in some areas with changes to public accountability and responsibility with a move to decisions, influence and control transferring from Local Enterprise Partnership to unity authorities.
At just over an hour long the Chancellor’s Budget could not be classed as an epic. It did though seem to be action packed and full of content, as to the substance that is likely to come to the fore when we see the devil in the detail. The next 12 months as we run up to an election will see if it has the desired impact he and the government want and the electorate might crave.
See this column in the April edition of East Midlands Business Link Magazine here.
