Written by Harry Leyburn, of investment platform Saxo
Jeremy Hunt will deliver his first Spring Budget as Chancellor later today in an attempt to reassure the nation that the UK economy is on the right track for growth as soaring inflation and a rising cost of living controls the narrative.
His speech will come six months after his predecessor Kwasi Kwarteng sent markets swirling after unveiling lavish tax cuts and a left field fiscal plan that was the beginning of the end for his and then Prime Minister Liz Truss’ time in the Government.
Unlike Mr Kwarteng, Hunt will be working towards building stability for the UK government and avoid a repeat of the mini budget evading any risk that could trigger panic or concern among voters.
The Chancellor is expected to cover a number of key areas. Prioritising public finances, lowering energy prices, helping recession fears recede and building a foundation for growth by introducing a new tax break for businesses.
Businesses and corporation tax
The Chancellor is expected to set out a new tax break regime for businesses during the budget, with corporation tax due to rise from 19% to 25% in early April. To encourage more investment, the Chancellor will also announce 12 new investment zones in the UK to supercharge hi-tech growth. This is welcome news to businesses in the UK who have been directly impacted by the pandemic and the cost of living crisis.
The triple lock, a potential adjustment to the state pension age, and a review of pension allowances are all also anticipated to be on the Chancellor’s list for the Spring Budget. In fact, Mr Hunt is said to boost the lifetime allowance for pension savings from the £40,000 cap to as much as £60,000. This means pensioners can increase their annual retirement savings if they can afford it.
The Chancellor is also planning to increase the state pension age from 66 to 68 in the next few years to encourage over 50s to fill out the gaps in the workforce. This decision will impact millions of people in the UK, especially those who are already struggling financially.
Energy Prices/Fuel Duty
After wholesale oil and gas prices rose in 2022 off the back of the conflict in Ukraine, millions of households have seen their energy bills rise significantly. Last year, the Government stepped in and formed the Energy Price Guarantee to help support millions of consumers from losing out on money, capping their energy bill prices at £2,500 per month. Though this cap is set to rise from £2,500 to £3,000, Mr Hunt is under pressure to announce an extension of the Energy Price Guarantee.
Though this will come as a relief to UK households, it is not going to be hugely beneficial in reducing their monthly costs as base energy prices are still likely to rise in the near future.
There’s even more welcome news for parents who have been battling with the cost of childcare and the cost of living crisis at the same time this year. Jeremy Hunt could be planning to change the eligibility for the 30 free hours of childcare a week the Government currently offers to children aged three down to those aged one and two. This decision would be a relief to millions of parents struggling to pay the high childcare costs.