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Spring Budget: behind the headlines

20th Mar 2023
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Despite intentions to ‘keep the Budget boring’, Chancellor Jeremy Hunt’s speech on Wednesday still had its fair share of pantomime theatrics (including the Deputy Speaker telling one MP to ‘stop it!’ during a particularly lively bout of political braying.)

As ever, the detail of what Hunt said (or didn’t say) was perhaps more pertinent than what the media chose to highlight in headlines. Although talk of pools, potholes and great British pubs made it into the speech, some factors most affecting businesses and individuals up and down the country didn’t cross the Chancellor’s lips. 

So, as usual at BTCSoftware by Bright, we've dug into the detail of what was and wasn’t said and pulled in some key reactions and comments from experts to save you some time in digesting what's behind the headlines of the Spring Budget of 2023.

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Measures, details and responses

The Chancellor was keen to emphasise that, while the planned corporation tax hike would still go ahead, only 10% of businesses would ultimately end up paying that rate.

But, with a tapered rate for businesses that earn between £50,000 and £250,000, it’s still the largest rate increase in the tax’s history (which, notably, wasn’t mentioned). 

Shevaun Haviland, Director General of the British Chambers of Commerce, was critical of the increase: “The Government failed to reform business rates which we have repeatedly called for. If the UK’s innovative growth industries are to remain competitive on the world stage, then Government must shift the dial further.”

There was also a keen focus on the UK avoiding a “technical recession” —  with the Chancellor repeatedly referencing that he’d consulted with Office for Budget Responsibility and considered its predictions (reminding us, with a heavy hand, of his predecessor’s failure to do so!)

most people would probably still view a 0.2% drop in the size of the economy across the year as a recession.

People are sceptical about how rosy the picture really is, though. 

In the UK, a recession is defined as two quarters of successive negative growth. Alan Shipman, Senior Economics Lecturer at the Open University, noted that, while the OBR now shows GDP falling in “just one quarter [...] most people would probably still view a 0.2% drop in the size of the economy across the year as a recession.” 

When it came to pensions, scrapping the lifetime allowance and increasing the annual allowance by 50% were front and centre of the speech. 

The Institute for Fiscal Studies was glad to see “poorly designed pensions tax allowances scrapped or increased” – but noted that the measures would “encourage a relatively small number of better-off workers to stay in the workforce a bit longer. These pensions tax changes are unlikely to have a big effect on overall employment.”

Finally, let’s talk about full expensing – the new policy designed to lessen the burden of the super-deduction ending in April. 

James Brougham, Senior Economist at Make UK, said that having full expensing in place for three years (rather than two) would allow more time for considered investment planning. 

He noted, though, that: “a longer or permanent implementation would better fit the longer investment cycles of the [manufacturing] sector.

“Concerns also remain for those smaller businesses with less access to capital, as it’s those companies who are more likely to lease or buy second-hand plant & machinery – of which both methods of capital investment are excluded from the announced scheme’s benefit.”

What’s the overall takeaway for businesses and individuals? 

While the Chancellor was big on reinforcing his plan —  “‘we’re sticking to the plan, and the plan is working!” —  as well as rejecting the narrative of decline, the overall consensus is that it’s still a rough road ahead. 

In fact, says Paul Johnson, Director of the Institute for Fiscal Studies, “The bigger fiscal picture hasn’t changed enormously since the autumn [...] We’re still in the midst of an enormously difficult period for households. We’re by no means out of the woods yet.”

What’s clear is that individuals and businesses will be wondering exactly how these measures will affect them —  and turning to their accountants to help guide them through. 

And, as ever, through tech, we’re here to help make your job in doing that as easy as possible! 

Bright makes reliable accounting software that accountants can trust. Find Bright online here.