What will Jeremy Hunt’s Spring Budget mean for you?
Chancellor Jeremy Hunt has celebrated his Spring Statement as a ‘growth’ budget. So what does it mean?
by: Isabella McRae, Evie Breese, Michele Theil and Liam Geraghty
15 Mar 2023
The Chancellor of the Exchequer Jeremy Hunt, accompanied by his ministerial team and watched by his wife and children, leaves 11 Downing Street on his way to deliver the budget. Picture by Simon Walker / No 10 Downing Street
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Chancellor Jeremy Hunt has delivered his Spring Statement laying out plans for the country, the first full budget since Liz Truss’s disastrous mini-budget which tanked the economy in late 2022.
Hunt called it “a chance to deliver stability”, providing support for families facing the cost of living crisis, bringing down inflation and providing a pathway for growth.
Labour leader Keir Starmer called it a budget “for managed decline” leaving the UK as “the sick man of Europe”, with empty supermarket shelves and enormous healthcare waiting lists after 13 years of Conservative rule.
So what does it mean for you? And is it really the answer to all our financial ills? We’ve broken answered the questions to explain exactly what will change and how your life might be affected, from your bank balance to work life, housing and the environment.
What will the Spring Budget mean for your bank balance?
What did Jeremy Hunt say about the energy price guarantee?
Jeremy Hunt confirmed he is delaying the increase in the energy price guarantee for the next three months – so average household bills will stay at around £2,500 a year, rather than increasing to £3,000 as planned.
The drop in wholesale gas and electricity prices has made this possible. Through the guarantee, the government essentially makes up the difference between what households are paying and the cost of buying energy from wholesale markets.
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Are energy bills going up in April?
A typical household’s energy bills will remain at around £2,500 a year because of the extension of the energy price guarantee – so our energy bills aren’t going up.
But the energy rebate is set to end this month for the majority of households. This was a £400 discount on energy bills spread over the winter months and the end to that will come as a jolt to households for whom it has been a lifeline.
National Energy Action chief executive Adam Scorer says this will mean “households will be £67 a month worse off. Energy bills from April will be higher than they’ve ever been during the crisis.
“There will be 7.5 million UK households in fuel poverty – up from 6.7 million. The cost of a warm and safe home is still out of reach for millions.”
Will prepayment meter customers pay less on their energy bills?
The government has announced that prepayment energy meter bills will be brought in line bills by direct debit. This will save prepayment meter customers around £45 a year, according to the BBC.
Low-income and vulnerable people disproportionately pay their bills by prepayment meter, and have faced a “penalty” of having to pay more for energy for years.
The government’s decision comes after campaigners have called for an end to the forced installation of prepayment meters. Ofgem temporarily banned this practice, but it is set to end at the end of March and energy companies will legally be allowed to forcibly install prepayment meters again.
Are our taxes going up?
Taxes aren’t going up exactly, but through a mechanism called fiscal drag people could end up paying a bit more. In the Autumn Statement, the chancellor extended the freeze on income tax and national insurance thresholds until April 2028, meaning people pay a bigger share of tax when they get pay rises and have a smaller share of income that is tax free.
Here’s how it works. If your wages rise with inflation, a higher proportion of your income is paid in tax. So that cost of living pay rise might not mean quite as much extra cash as you thought it would each month. Chancellors like this tactic because you’re less likely to notice the impact on your wallet – it raises government revenue without explicitly raising tax rates.
Is corporation tax going up?
Hunt has announced that the government is going ahead with a planned rise to corporation tax, set to take effect in April. Big businesses will see a 6 per cent increase in the corporation tax rate (from 19 per cent to 25 per cent). This will see the government rake in £18 billion, according to The Telegraph.
But it will only hit businesses with profits of more than £250,000. Those with profits between £50,000 and £250,000 won’t see as big a hike, and those with profits under £50,000 will continue to pay a 19 per cent corporation tax.
In the Autumn Budget, the government promised to increase benefits in line with inflation from April – and they are increasing by 10.1 per cent. But campaigners have repeatedly warned this is “too little, too late” to help low-income families.
Universal credit claimants will be £140 short of the money needed to afford the essentials each month even after benefits increase, according to analysis from the Trussell Trust and Joseph Rowntree Foundation (JRF). The charities called for an “essentials guarantee” so that low-income people can afford the essentials needed to live but the government did not proceed with this.
What is happening with cost of living payments this Spring?
The government already announced there will be cost of living payments for low-income households between Spring 2023 and 2024. There is no suggestion of further cost of living payments after this point – even though campaigners have warned the current support won’t be enough to help vulnerable people.
Not all poorer households will get cost of living payments, as the Resolution Foundation points out. This is mainly because there are 1.5 million people in the two lowest income groups who don’t get benefits, simply because they haven’t applied. There are also half a million low-earners who are not eligible for benefits, and most university students aren’t eligible either.
Has the government scrapped planned rises in fuel duty?
Hunt has scrapped the planned rises in fuel duty, extending the freeze and the 5p cut for a further year.
Fuel duty is, in theory, supposed to go up with inflation each year. But, as the i reports, chancellors have frozen fuel duty for the last 12 years and the measure has effectively become permanent.
If the duty cut had been removed as originally planned, the RAC said current petrol prices would rise to 153.72p per litre (up from 147.72p) and diesel to 173.19p per litre (up from 167.19p) when factoring in VAT. The Resolution Foundation went further and said the increases could have added up to 12p/litre to prices.
Cancelling the planned rises will cost £5bn, according to the Resolution Foundation.
What does the Budget mean for work life?
What is in the budget about childcare?
The cost of childcare is now so high in Britain that some parents are leaving their jobs, saying it’s more cost-effective for one parent to stay at home with the kids than have both parents working while paying childcare fees.
Jeremy Hunt has unveiled a £4 billion package to expand free childcare to parents of all children over nine-months old, who will be eligible for 30 hours a week under the new scheme, the same as three- and four-year-olds.
To help parents on the lowest incomes stay in work, the government plans to pay childcare costs upfront for those receiving universal credit. The current system requires parents to pay the fees upfront, then claim the money back, which leaves them at risk of falling into debt.
To support parents on Universal Credit move into work or increase their hours, we’re increasing the amount of UC support for childcare costs by almost 50% & will pay this upfront instead of in arrears.
How does Jeremy Hunt plan to get more people into work in the Spring Budget?
The government is targeting over-50s in its mission to fill the more than 1 million job vacancies ailing the economy.
Jeremy Hunt has personally implored those who have taken early retirement to return to work, though the Resolution Foundation has highlighted that many of those who took earlier retirement were higher-paid professionals who own their home so may lack a financial incentive to work.
The “midlife MOT”, a government service that helps people to assess their financial situation before retirement, will be beefed up to help more people and new apprenticeships for older works — dubbed “returnerships” — will join “skills bootcamps” to teach older people the skills needed to work in industries that are desperate to hire.
But while much of the government’s strategy is focused on older people, the CIPD, the professional body for HR and people development, says that with more people aged 16 to 24 who are not working, but would like to work, than there are people aged 50-64, it’s young people’s careers that should be focused on.
Jon Boys, senior labour market economist for the CIPD, said a renewed focus on creating more flexible, high-quality and productive jobs across the economy would support all ages into work, while investment in careers advice services and boosting apprenticeship opportunities would particularly help young people.
Is the government scrapping Work Capability Assessments?
In the Health and Disability White Paper, set to be published on Budget Day, the government will lay out its intention to scrap the Work Capability Assessment which decides someone’s eligibility for sickness benefit and capacity to work.
This means claimants will continue to receive the payments when they move into work, without fear of being assessed and losing the benefit.
“Scrapping the work capability assessment will be welcome if it means an end to assessments that cause anxiety instead of helping people achieve their aspirations,” said the TUC’s Paul Nowak.
However the change, called “the biggest reform of disability benefits in a decade” by Torsten Bell at the Resolution Foundation, will take “years to implement”.
“The goal of avoiding labelling some people as unable to work is valuable, but no-one should pretend this reform is easy”, Bell continued.
“Alongside winners who keep higher benefits for longer, there risks being significant losers who are too ill to work but don’t have a longer lasting disability – for example, because they are recovering after an operation.”
Will people be allowed to save more in pensions after the Spring Statement?
Hunt said the government is set to raise the amount that someone can put in their pension pot before paying tax. People are now about over the course of their lifetime.
Someone over 55 (who has already accessed their private pension) can put £10,000 in their pension pot now, when previously they would only have been able to put £4,000 in there. This is intended to keep more people in work longer.
What did the government have to say about housing?
Hunt laid out a £33m funding package for veterans, including £20m to build and refurbish homes through the Veteran Capital Housing Fund, to further attempts to end homelessness for ex-forces personnel.
The pledge also included £3m to support veterans who received serious physical injuries during their service as well as a further £10m to help the government’s Office for Veterans’ Affairs boost services and engagement.
The funding, which has been called a “welcome surprise” by campaigners, is set to contribute to the government’s promise to ensure no veterans are homeless by the end of 2023.
What’s in the Spring Budget about the environment?
The kind of immediate fixes that have been called for — both bringing down energy costs and carbon emissions — have largely been overlooked. But Hunt’s statement did make promises which would both increase the number of green jobs and the UK’s energy security in the long run.
What is in the budget about carbon capture?
Hunt has announced £20bn in funding over 20 years for carbon capture and storage technology, taking carbon dioxide emissions from industrial production of steel or cement, transporting it, and then storing it underground so it is not released into the atmosphere.
The government has said they hope to store 20-30 million tonnes of carbon dioxide each year by 2030, setting out a pathway towards achieving net zero emissions by 2050.
Whats happening with nuclear power?
The announcement also includes investment into small modular nuclear reactors (SMRs), which are advanced reactors producing one-third of the energy of a traditional nuclear power reactor. SMRs are considered an effective way of producing huge amounts of low-carbon electricity.
Hunt said: “We don’t want to see high bills like this again, it’s time for a clean energy reset. That is why we are fully committing to nuclear power in the UK, backing a new generation of small modular reactors, and investing tens of billions in clean energy through carbon capture.”
Investments into carbon capture and nuclear power are expected to create up to 50,000 highly skilled green jobs, in line with the “back-to-work” policies elsewhere in the budget.
What about air passenger duty?
Among Hunt’s policies is an increase of the air passenger duty, which is a tax based on how far people travel. Hunt has increased this in line with inflation despite complaints from airlines.
A number of airlines said that the increase would mean flights departing from the UK would be “amongst the very highest in the world” as well as undermining their efforts to fund investments in sustainable aviation.
While not necessarily a climate-related policy, the increase in ticket prices may lead to people travelling less or being more mindful of when and where they go amid a cost of living crisis.
Phew. A lot to take in. Do you have opinions about the Spring Budget? We want to hear from you. And we want to share your views with more people. Get in touch and tell us more.
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