The Chancellor delivered his first full Budget against a much more positive backdrop than many had anticipated towards the end of last year. In fact, economic indicators have been almost universally positive since last November, when it seemed likely that the country could slip into a deep recession in 2023.

But with continuing high inflation, elevated energy prices and the cost-of-living crisis still looming large, there were few doubts about the continuing challenges facing the economy as Jeremy Hunt delivered his Spring Budget statement to the House of Commons.

• Plant and machinery investments to receive 100% tax relief
• More ‘back to work’ incentives to help with labour challenges
• Fuel prices to remain stable
• Energy-cost support continues
• Corporation tax will increase for some businesses

This was a Budget aimed at getting growth going. Two areas were in focus. The first, investment, is a long-standing UK problem. The announcement to allow companies to offset all capital spending against their tax bill is the latest effort to spark it into life. 

Business investment has rebounded in recent months, but there’s still plenty of catching up to do. The Chancellor made a bid to ensure the momentum is sustained, announcing a three-year scheme that will allow companies to offset all capital spending against their tax bill - this will cost about £9bn a year and likely to boost business investment by about 3% than otherwise would have been the case.

The main rate of corporation tax will increase to 25% for companies making more than £50,000 profit, with tapered relief up to £250,000 of annual profits.

The second focus was bolstering the size of the workforce. This is a relatively new problem to have emerged in recent years. Here, there are changes to childcare provision and pensions. But at least both measures are being launched amidst a better growth environment, after an upgrade to the outlook from the Office for Budget Responsibility (OBR).

Better economic forecasts gave the Chancellor the option to spend in this Budget, whilst keeping within his fiscal rules. That option has been used with policy changes costing more than £21bn in each of the next three years. Roughly 60% of that expansion comes from lower taxes (especially corporation tax allowances) and 40% from higher spending (mainly childcare and defence). 

A number of policies were aimed at persuading more people into work, with a focus on more experienced workers, parents of young children and people with disabilities. And it’s much needed. 

Working-age inactivity has increased by around half a million people since the pandemic struck, and employers are struggling to close one million vacancies. The OBR called it the biggest positive supply-side intervention they have ever assessed in its forecasts.

To encourage higher paid 50+-year-olds to stay in work, an increase in the annual cap on tax-free contributions to pensions from £40k to £60k was unveiled. The lifetime allowance above which people incur tax charges was also scrapped. But according to some estimates it will affect less than 4% of the workforce (but helpfully for the NHS that should help doctors). A new programme of apprenticeships aimed at 50+-year-olds, called “Returnerships,” was also announced.

The Work Capability Assessment will be abolished, and benefit entitlement will be separated from an individual’s ability to work. This means that claimants will be able to continue to receive disability payments after they return to employment. There will also be a new employment scheme for people with disabilities spending up to £4K per person to match about 50,000 disabled people with jobs every year. The Chancellor called it “the biggest change to welfare system in a decade.”

Free 30 hours childcare for working parents with three and four-year-olds has been expanded to cover all children over the age of nine months. However, this will be introduced in stages up to September 2025. 

Parents on Universal Credit will be able to start claiming childcare costs up front, rather than in arrears. The cap of those claims has also increased by almost 50%. To help with availability of childcare places, each staff member in England will be able to look after up to five two-year-olds instead of four. And the hourly rate paid to childcare providers for free hours will also increase. 

Another big benefit since the Autumn statement has been the reduction in gas prices. The energy price support scheme was due to rise to £3k in Q2 but earlier today it was confirmed the £2.5k level will be extended through Q2. Thereafter the price cap will come back into play but the decline in wholesale energy prices mean that the cap looks set to be less than £2.5k. 

Businesses will receive support with energy costs via the Energy Bills Discount Scheme which begins on April 1st