In an hour-long statement to the House on Wednesday, March 15, Chancellor Jeremy Hunt set out the government’s 2023 Budget.
Budgets are usually annual occurrences and an opportunity for the UK government to set out their priorities through the direction of public funds.
The 2023 budget tackled areas from defence, to childcare, devolved bodies and benefits reform.
The Chancellor continuously repeated the government’s priorities throughout his statement to the Commons.
He pledged to:
- Halve inflation.
- Reduce debt as a proportion of GDP.
- Grow the economy.
In May 2010, when the Conservative and Liberal Democrat coalition came to power, inflation sat at 5.1 per cent.
Its lowest value since then was 0.7 per cent in October 2015.
Its highest was 14 per cent in November of 2022.
The Chancellor quoted the OBR’s prediction that inflation will reduce from 10.7 per cent in Q4 of 2022 to just 2.5 per cent at the end of 2023.
He also said that the levels of inflation were the “root cause of strikes” and that the government will tackle the strikes, but not in a way that will affect their goal of reducing inflation.
Many people are focused on the rising cost of energy, as it is a vital part of modern life.
The Budget lists several policies centred around the price of energy, including:
- The continuation of the Energy Price Guarantee for three more months. This limits the amount that suppliers may charge to £2500 per household.
- The four million households on pre-payment meters will no longer pay more, as the Chancellor committed to bringing their costs in line with those of direct debits.
- A £63 million fund to keep community centres struggling with energy costs open, such as swimming pools – a touchy subject in the chamber, as opposition MPs roared with laughter following reports that PM Sunak funded an upgrade of the electricity grid in North Yorkshire so that it could heat his private pool.
The Budget also discussed energy production policies, such as:
- £20 billion support for carbon capture, usage and storage. The Chancellor said that this will support 50,000 jobs and capture millions of tons of CO2 by 2030.
- Encouraging private investment in nuclear by reclassifying it as environmentally sustainable, giving it investment bonuses.
- Launch of “GB Nuclear” to help produce 25 per cent of the UK’s energy by 2030.
The government’s focus on nuclear and carbon capture has been criticised by groups such as Greenpeace UK.
Research and development funds
Hunt also pledged funds towards the research and development sectors, including:
- New mechanisms and rules to help companies launch their AI tools to markets easily.
- £900 million to implement the recommendations of the Independent Review of The Future of Compute.
- A £2.5 billion research programme in quantum computing.
- The creation of the ‘Manchester Prize,’ a £1 million yearly prize given to those with the most groundbreaking AI research.
Disability benefits reform
A headline policy of this budget was the reform of disability benefits.
The work capability assessment will be abolished in order to separate benefit entitlement from the ability to work.
The Chancellor hopes that this will incentivise more disabled people to seek jobs without the fear of losing benefit income.
Tax and duty changes
The Chancellor announced a swathe of changes to taxes and duties on products.
Duty changes included:
- Increased draught relief on qualifying beer and ciders from 5 per cent to 9.2 per cent, allowing duties to be frozen from August and 11p lower than in supermarkets.
- Planned 11p rise in fuel duty scrapped and 5p cut maintained, saving the average household £100 next year according to Hunt.
- Hunt vaguely mentioned an increase in tobacco duty.
Hunt praised the Windsor Framework in this section, as it allows changes in duties to be felt in Northern Ireland.
Whilst the 6-point increase in corporation tax will still go ahead, the Chancellor announced a new “full capital expensing” that means just 10 per cent of companies will pay the full 25 per cent.
This measure is being implemented for three years, with the intention of permanency when it’s fiscally responsible to do so.
It is worth £9 billion per year and allows companies investing in IT, plant or machinery to deduct the costs from their taxable profits.
Again, the Chancellor quoted the OBR in his assessment of this policy, saying that it will increase business investment by 3 per cent yearly.
Furthermore, the Chancellor pledged new measures to tackle those promoting tax avoidance.
According to the GOV.UK website, tax avoidance “involves operating within the letter, but not the spirit, of the law.”
Therefore, unlike tax evasion, tax avoidance is legal. However, it involves bending rules in a way that Parliament did not intend and can be punished.
A new economic strategy
The four E’s of the government’s economic strategy were:
The Chancellor began this section by paying tribute to Margaret Thatcher’s Chancellor, Nigel Lawson and his deregulation of finance that boosted London as an investment zone.
Arguably, these reforms also led to the volatility seen in the 2008 financial crash.
He especially discussed Canary Wharf, a business district in London known for being a leading financial centre in the UK (and a popular venue for Cybermen).
He committed to £80 million each to fund “new Canary Wharfs” in 12 regions of England and at least one in each of Scotland, Wales and Northern Ireland. These areas would have to prove the economic benefits of such an “Investment Zone” in an application to receive the funding over five years.
The Chancellor also pledged to increase the £500mn dedicated to pothole repair to £700mn.
Furthermore, as a consequence of Barnett’s formula (the calculation of how much constituent countries receive from the UK Treasury), Scotland will receive £320mn, Wales £180mn and Northern Ireland £130mn.
On top of the £320 million from the Barnett formula, Scotland will receive £8.6 million for Edinburgh festivals.
There has also been £1.5 million directed to repair Cloddach Bridge, in Scottish Conservative leader Douglass Ross MP’s constituency of Moray.
The previously mentioned policies of lowering business tax, reducing energy costs and supporting growing industries were part of this aim to boost British enterprise.
The Chancellor said that sanctions are to be more vigorously applied to those that are able to work, but don’t.
Furthermore, anybody working less than 18 hours a week despite being able to work more will receive work coach support.
He also mentioned some measures to ensure that those over 50 remain in work.
Childcare reforms will see the government pay for childcare for those families that have parents moving into employment.
Furthermore, the Chancellor said that he will fund schools to provide wrap-around childcare from 8 am to 6 pm.
His hope was that this will be nationally available by September 2026.
Another headline policy was that for families where both parents are working 16 hours a week, 30 hours of childcare will be paid for by the government.
This will be introduced in stages from April 2024 to September 2025 and the government hopes it will encourage parents to get back to work.
Opposition responses to the budget
Keir Starmer said that Hunt’s budget was “dressing up stagnation as stability”.
He also said that policy regarding the NHS was lacking, saying that he was “waiting for him to match Labour’s ambition… and yet it never came.”
SNP economy spokesperson Stewart Hosie told the Commons that Brexit “slammed the brake on UK investment” and that we are “a country which unilaterally imposed trade barriers with its nearest neighbours.”
Featured Image Credit: Andrew Parsons / HM Treasury and The Rt Hon Jeremy Hunt MP
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