Budget 2023 – Out of Stability Comes Growth?
Having taken the credit for restoring basic stability to the UK economy through his statements in October and November, Jeremy Hunt’s first full Budget was all about his vision for long term growth. This was based on his four key pillars: Enterprise, Employment, Education and Enterprise.
With businesses nationwide suffering from labour shortages, and 1 million job vacancies, most of the key measures were aimed at getting some of the 7 million “economically inactive” working age adults back into employment. Measures include:-
- Welfare reform for those suffering long term sickness or disability;
- Universal Credit changes to encourage claimants back into work or to work longer hours;
- Pensions tax reforms, including an increase in the pension annual allowance from £40,000 to £60,000, and the abolition of the lifetime allowance, to encourage the over 50s to work longer;
- The much trailed extension of free childcare places to children over 9 months old.
If these measures work, then expanding the available workforce can only be good news for businesses who are struggling to recruit, although the impact of these changes is only likely to be felt over time.
However, business will be disappointed that the scheduled rise in the main rate of corporation tax from 19% to 25% will still go ahead, despite the Chancellor recognising the need to maintain a highly competitive corporation tax regime against other G7 members. This brings with it additional complexities in terms of associated companies and quarterly instalment payments, which could trip up unwary companies.
The consolation prize for companies is “full expensing” of qualifying investment in main pool plant and machinery for a three year period, with this potentially becoming permanent depending on affordability. However, this 100% first year allowance (with 50% relief for special rate pool assets) won’t extend to other capital expenditure such as buildings, and doesn’t appear to benefit smaller businesses who don’t utilise all of the existing £1m Annual Investment Allowance.
A further Energy Bills Discount Scheme for businesses up until March 2024 could be a lifeline for some, but we will have to wait to see the detail of the latest scheme.
Overall, it feels like this Budget will be a “slow burn”; the Chancellor didn’t pull the immediate rabbit from his hat, and we will need to wait while the measures announced feed through the wider economy. Perhaps the rabbit will finally escape the hat in next year’s pre-election Budget…