The Chancellor of the Exchequer, Jeremy Hunt, delivered his 2023 Budget this afternoon, Wednesday 15 March. The Chancellor confirmed that the Office of Budget Responsibilities (OBR) now forecasts that the UK will avoid a ‘technical’ recession in the UK in 2023. Inflation is expected to fall to 2.9% by the end of the year.
Government debt is still around 94% of gross domestic product, but is targeted to fall by 3% over the next four years.
The Budget measures focused primarily on growth, aiming to remove business investment obstacles and enhance R&D. In particular:
- The Treasury has already pre-announced thatthe Energy Price Guarantee will remain at £2,500 a year for a typical household until the end of June.
- Pre-payment meter charges will be brought into line with standard direct debit.
- There will be a fund to keep leisure centres afloat, with £40 million for making swimming pools more energy efficient, and £20 million to help leisure centres deal with rising costs.
- There will be increased funding for charities.
- Pubs: from 1 August, draft beer will carry an 8% discount compared to supermarket retail sales.
- Fuel duty is again frozen and the 5p cut (introduced in the Spring Statement 2022) remains in place.
- Funding for the Ministry of Defence will increase by 11% in funding and will reach nearly 2.25% of GDP by 2025.
- 12 new Investment Zones were announced, spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool; there will also be at least one in each of Scotland, Wales and Northern Ireland.
- There will be an additional £320m of funding for the Scottish government, £180m for the Welsh government and £130m for the Northern Ireland executive.
- Various other regeneration schemes and “levelling up” measures were announced.
On tax, specific announcements included the following:
- The increase in the corporation tax rate from 19% to 25% from 1 April 2023 will take effect as planned, payable by companies with profits in excess of £250,000 (a marginal rate applies from £50,000).
- In addition to the increase in the annual investment allowance for capital expenditure remaining at £1 million indefinitely, “full expensing” is being introduced for capital expenditure on IT equipment, plant or machinery for the next three years, with the intention to make it permanent as soon as it is responsibly possible.
- From 1 April 2023, an enhanced credit will be introduced for loss-making R&D-intensive SMEs (those spending more than 40% of their total expenditure on R&D), worth £27 for every £100 of R&D investment
- A new Audio-Visual Expenditure Credit will replace existing creative industry reliefs, providing a credit of 34% for high-end TV and 39% for animation and childrens’ TV.
- The higher rates of Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Exhibitions Tax Relief will be extended for another two years.
- Pension limits will be increased: the annual contributions limit, currently capped at £40,000 per year, will rise to £60,000; the Lifetime allowance (which had been frozen at £1,073,100) will be abolished.
Further measures of note:
- Childcare funding for parents on Universal Credit will increase by almost 50%, and a new 30-hour free childcare offer for working parents for children aged 9 months to 4 years will be introduced in stages from 2024 to 2025
- There will be £20 billion of support for carbon capture. Subject to consultation, Nuclear Power will be classed as ‘Environmentally Sustainable’ which will allow it to receive more public-private funding.
- The Government will launch a new Artificial Intelligence (AI) sandbox, reform UK patents process, commit £900k of funding for an exoscale computer and will publish a quantum strategy. A new national annual AI prize of £1 million for the next ten years will incentivise innovative research.
See our budget summary here.