For further comment or to arrange an interview please get in touch with Max Anderson: max@brightblue.org.uk or 07850 684474.
Commenting on the Spring Budget 2023, Ryan Shorthouse, Chief Executive of Bright Blue, said:
“This was steady stuff from the Chancellor, designed to reassure the markets and the public of Conservative economic competence after the turmoil of 2022.
“We’re now forecast to avoid a technical recession this year, but economic growth and living standards remain dampened for the foreseeable future. Tax and public debt levels are expected to stay historically high throughout the decade. This is no roaring twenties.
“But some brightness is beginning to show. Inflation will fall rapidly by the end of the year. The Energy Price Guarantee will be extended until the Summer, after which bills will drop considerably.
“This country really does need to go for growth. Improving productivity and expanding labour market participation have been rightly identified as two of the most essential ingredients for garnering growth. The Budget today makes solid steps towards both, adopting several Bright Blue policies.
“Full expensing of capital investment against Corporation Tax, as a successor to the Super Deduction, should catalyse productivity. Increasing childcare subsidies and conditionality in the benefits regime might have a modest impact on employment rates.
“The new childcare policies were surprisingly and positively bold. Current or prospective parents up and down the country will be relieved. But the phased extension of the free entitlement to children under the age of 3 could have been accelerated.
“You get an expanded workforce from three main sources: parental, older age and migrant employment. The Government is doing too little to keep over 50s economically active. Increasing the annual allowance for tax-free pensions contributions, and abolishing the tax-free pensions lifetime allowance, are deeply regressive and wasteful policies, and could well accelerate retirement for affluent earners who can reach savings goals quicker. Better to raise the age at which people can first access both their state and private pension.”
The 2023 Spring Budget adopted 5 Bright Blue policies:
- Upfront payment of the childcare element of Universal Credit.
- Uprated maximum amounts claimable under childcare element of Universal Credit.
- Extended Early Years Free Entitlement to children under the age of three.
- Relaxed staff-to-child ratios in formal childcare settings.
- Full expensing of capital investment in new plants, machinery and industrial buildings against Corporation Tax.
Childcare
- Upfront and uprated payment of the childcare element of Universal Credit.
- Extended Early Years Free Entitlement to children under the age of three.
- Relaxed staff-to-child ratios in formal childcare settings.
- A sign-up bonus for new childminders of at least £600.
- Increased funding for schools and local authorities for wraparound care so all school-age parents can drop their children off between 8am and 6pm.
- Increased funding paid to nurseries providing the existing Early Years Free Entitlement.
Eve Redmond, Research Assistant at Bright Blue, commented:
“The exorbitant costs of childcare have contributed to Britain’s waning workforce. The Chancellor’s extension of free childcare hours is therefore a very welcome one.
“The decision to pay the childcare element of UC upfront and at an increased rate, as well as extending the Early Years Free Entitlement, will allow parents – particularly single parents – to bridge the gap between being a parent and a worker.
“Yet, more still needs to be done to not only attract new people to the childcare profession, but to ensure they are retained and suitably rewarded.”
Taxation
- Raised the headline rate of Corporation tax to 25%.
- Created 12 new Investment Zones.
- Full expensing of capital investment in new plants, machinery and industrial buildings against Corporation Tax.
- Extended tax credits for SME companies investing over 40% into R&D.
Sam Robinson, Senior Research Fellow at Bright Blue, commented:
“Sunak has balanced fiscal responsibility – by raising the rate of Corporation Tax – with a radical pro-growth boost in the form of full expensing, which, for the next three years, will allow businesses to pursue growth without being punitively taxed on their investments.
“After a decade of ineffectual yo-yoing on Corporation Tax rates, full expensing is a big improvement to the fundamental design of the UK’s business taxes. But to give businesses certainty for the long term and avoid another tax cliff-edge, full expensing should be made permanent.
“The Chancellor’s prime focus should be on small businesses, where support should be prioritised. The best way of helping small businesses is by cutting Employers’ National Insurance, which would reduce their main overhead – staffing costs.”
Employment
- Expanded and improved the Midlife MOT Strategy.
- Introduced Returneeships scheme.
- Increased the pensions Annual Allowance from £40,000 to £60,000.
- Abolished pensions Lifetime Allowance Charge.
- Introduced a DWP White Paper on disability benefits reform.
- Introduced a pilot for the WorkWell Partnerships Programme.
- Increased funding for Work Coaches to help those who are long-term sick and disabled into work.
- Extended Help To Save scheme by 18 months.
Sam Robinson, Senior Research Fellow at Bright Blue, commented:
“Scrapping the pensions lifetime allowance may help NHS retention, but it is a regressive giveaway for a small number of the wealthiest earners in society. This is money that could have had more impact elsewhere.
“There are other ways pension policy can boost the labour market participation of older workers. Raising the age at which you can access your private and state pensions would incentivise a much broader group of people to stay in work and come with a smaller price tag.
“While the extension of the Help To Save scheme is welcome, there was comparatively little on offer in this Budget to help those on low incomes and those in self-employment save adequately for retirement. This should be a more urgent priority, as low saving among these groups is a ticking social and economic time bomb that needs to be addressed sooner rather than later.”
Energy
- Extended the £2,500 Energy Price Guarantee until June 2023.
- Extended the Climate Change Agreement scheme for two years to allow eligible businesses £600 million of tax relief on energy efficiency measures.
- Reclassified nuclear energy to be included in the green taxonomy, subject to consultation.
- Launched the Great British Nuclear programme.
Bartek Staniszewski, Researcher at Bright Blue, commented:
“Continuing to support households with energy bills is sound, as households continue to face elevated bills. But subsidising energy demand in the short term also casts light on whether the Government is doing enough to increase energy efficiency in the longer term. While this extension to the Energy Price Guarantee means that almost £30 billion will be spent now, only £13 billion is being spent on improving energy efficiency over the next two parliaments, even with the extra tax relief on energy efficiency measures announced today.”
Thomas Nurcombe, Research Assistant at Bright Blue, commented:
“Achieving net zero will not be cheap; it requires significant public and private investment. Moreover, we need sources of energy that are not at the mercy of geopolitical and geoeconomic insecurity. Redefining nuclear energy as ‘environmentally sustainable’ in the green taxonomy will provide the investment incentives to drive capital in the direction of British nuclear power.
“But promises on nuclear energy have been floated before. It is imperative that the Chancellor sticks to his word.”
Housing
- Introduce a Veteran Capital Housing Fund to provide £20 millions’ worth of extra housing for veterans.
- Funding to support clearer routes for housing developers to deliver ‘nutrient neutral’ sites to meet planning obligations.
Bartek Staniszewski, Researcher at Bright Blue, commented:
“The Budget’s relative silence on housing is sorely disappointing. Despite the housing crisis being one of this country’s most pressing challenges, housing scarcely features in the Budget: the Veteran Capital Housing Fund can at most provide a few hundred homes, while funding for nutrient mitigation schemes to facilitate planning is welcome, but will be of limited impact.
“Although fiscal restraint is understandable, greater action on housing need not take the form of lavish expenditure. Even small spending commitments can have a major impact; for example, giving more money to planning departments for the development of a greater number of local and neighbourhood development orders.”
[Image: Gov.uk]
