Friday, 1 Mar 2024

Seven key points we can expect in Jeremy Hunt's spring Budget

The spring Budget is about to be announced amid a backdrop of high inflation, strikes and a cost of living crisis.

Last autumn, Jeremy Hunt hiked taxes as he sought to reestablish the UK’s economic credibility following Liz Truss’ disastrous premiership.

It’s expected the chancellor will today focus on measures to encourage people back to work in a bid to promote growth.

But it comes as workers across many industries take to the picket line, sparking questions about how helpful this Budget will be.

Here’s a look at what we can expect.

Cost of living

The planned £500 hike in average energy bills in April is expected to be scrapped, meaning bills will stay around £2,500.

Tory backbenchers have urged Mr Hunt to support drivers who face a 12p-per-litre hike in fuel duty.

The chancellor is expected to end the so-called ‘prepayment premium’ on pre-payment meters from July.

More than four million households are expected to save on average £45 a year on their energy bills.

A 23% increase is expected this month but the levy has previously been frozen by other chancellors in the past.

There has been no announcement yet about what the chancellor will do.

Back to work

Mr Hunt will hammer home and encourage a return to work for benefits claimants, the over-50s and disabled to encourage growth.

How this will work with individual people and cases though remains to be seen.

Speaking in January at Bloomberg, he said employment levels were lower than they were before the coronavirus pandemic by around 300,000 people.

Other plans include axing the system used to assess the eligibility for sickness benefits, paying parents on Universal Credit childcare support upfront and increasing the amount they can claim by several hundred pounds.

It is the biggest reform to the welfare system in over a decade and will mean claimants can continue to receive the payments after they return to employment.

Other measures to be introduced include tackling the ever-growing cost of childcare which is crippling families across the country.

He is expected to announce a rise in the maximum universal credit childcare allowance by several hundred pounds.

But Joeli Brearley, CEO and Founder of Pregnant Then Screwed says this isn’t enough and said: ‘We welcome the Universal Credit system overhaul, but question why this has taken so long to implement?

‘The government was taken to court on this issue and after losing they went on to appeal the decision, costing the tax payer money and absorbing enormous amounts of charity resources.

‘Yet now they are wheeling this out as a solution to the childcare sector. It is good news, but it shouldn’t have taken this long.

‘Parents aren’t backing down on this issue. We know from our research that 98% of parents will be voting with their feet where childcare is concerned.

‘These proposals will do little to appease their concerns, salvage their careers or rebuild our crumbling childcare sector.’

Tax cuts

Some Tories have been pushing for tax cuts despite Mr Hunt being against the measure.

Eyes will be on the chancellor to see if he announces any kind of tax cut or relief for people and businesses.

Ed Powell, the founder of The Steel Landscaping Co. has noticed a sharp increase in his monthly bill.

His company, a supplier and installer of outside steel products, has seen the cost of producing their products using electricity increase by 60% and using gas by almost 130%.  

He said: ‘Energy price increases have been a continuing challenge for us, further exacerbated by the war in Ukraine. Manufacturing much of the materials we use such as steel and brick requires considerable energy output, and the cost of doing so has increased massively.’

He is calling for the government to continue supporting businesses whilst costs remain high. 

‘From our perspective we’d like to see a continuation of the energy bill relief scheme for businesses. 

‘However, if this does end as mooted in March, then we’d like to see some clarification on how the government is looking to support smaller businesses and how they might increase investor confidence in the construction sector to give it a boost in the coming months.

‘Perhaps this comes in the form of business rate relief for smaller businesses for subsidies or investment in apprenticeships, training and development.’

For Ami Pilkington’s campervan business in Gloucestershire, the cost is taking its toll.

She added: ‘Our card machine bill is around £200-350 every month which is a huge impact on a small business just for card processing fees.

‘I believe that charges should be less or that there should be a terminal/processing fee and minimal transaction charges. £350 seems like a lot of money just for processing a payment.’

Pensions

The chancellor is considering raising the £40,000 cap on tax-free annual pensions contributions.

The UK state pension age could also rise to 68 sooner than had been expected.

A rise in the lifetime allowance (LTA) on tax-free pensions savings could also be announced.

The Times said the chancellor would hike it to £1.8million, while The Daily Telegraph said it could be set to more than £1.5million.

The British Medical Association (BMA) has called the current LTA rate ‘punitive’ and argued it has encouraged doctors to leave the profession.

Defence

As the war rages on in Ukraine, defence spending will be an important priority in the Budget.

Rishi Sunak has promised an extra £5billion for the military over two years, with an extra £1.98billion this year and £2.97billion next year for defence.

This will take spending from 2% of GDP in 2020 to 2.25% in 2025.

Long-term indications about defence spending beyond 2025 could also be announced by the chancellor.

Pay deals

Strikes across various industries continue as various unions have still not reached an effective pay agreement with the government.

There is a glimmer of hope strikes will soon come to an end as negotiations start to take place.

But unions representing ambulance workers, physiotherapists, nurses and midwives remain locked in talks with the Department of Health.

The chancellor could use the Budget to offer details of a pay settlement to end the industrial action.

Customs

There are plans to give the UK’s 363,000 international traders a more streamlined customs process.

This will give traders six additional days to submit forms after border crossings.

It is designed to reduce admin burdens by creating fewer authorisations.

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