Key points of the 2023 budget: what has Chancellor Jeremy Hunt announced?

Measures in the budget included an extension of the energy price guarantee and a draft beer levy freeze, while Hunt’s pension reform went further than most expected.

Lifelong pension abolished

“I told you it was going to be a back-to-work budget,” Jeremy Hunt said, with economic inactivity a key goal.

However, the Chancellor’s pension tax reform went beyond expectations.

The £1m cap on how much can be put into pension funds before the taxes take effect was expected to be raised. Instead, it was abolished to encourage doctors in particular to delay retirement.

The annual tax-free contribution for pensions will also be increased from £40,000 to £60,000

“No one should be pushed out of the workforce for tax reasons,” Hunt said.

Energy price guarantee and cost of living

Most households were hoping the budget would include further relief on energy bills, and that was hours before Jeremy Hunt got going when the Treasury announced an extension to the energy price guarantee.

Under the extension, average bills will be capped at £2,500 a month through June, rather than rising to £3,000 next month as planned.

There were also measures to support childcare costs – which Hunt said would also encourage more parents to return to work – including extending 30 hours of free childcare per week to one- and two-year-olds.

Meanwhile, the fuel tax and VAT on fuel have been frozen.

Corporate tax reforms

The Chancellor said Britain will have “the most business-friendly tax system in the world” even after the forthcoming increase in corporate tax.

“Conservatives understand the importance of a low corporate tax system, but I want us to have the most corporate and business-friendly tax system in the world,” he said.

Hunt said Britain will still have the lowest rate in the G7 even after raising corporate tax from 19% to 25% in April.

The Chancellor also announced a new “full cost accounting” policy, which will allow companies to deduct all their spending on IT equipment, plant or machinery from their tax bills.

The policy will be in place for the next three years, but Hunt said the government intends to make it permanent.

“It’s an average of £9 billion a year in corporate tax cuts for every year that’s there,” Hunt said.

The budget came amid concerns that London would lose top firms to New York, with companies such as CRH and Arm announcing plans for US listings.

Hunt did not announce a plan today to keep firms in London but said he would return in his autumn statement with a plan to bolster the London Stock Exchange as a “more attractive place to list”.

Draft beer levies frozen

Earlier this week, Andy Slee, who runs the Society of Independent Brewers, warned the industry “faces sharply rising costs and a drop in consumer spending due to the cost of living crisis. For many breweries, the struggle to survive is a real challenge.”

Hunr promised relief for the brewing sector and extended the alcohol tax freeze until August 1st.

“British ale may be warm, but duty on a pint is frozen,” said Hunt.

Tim Martin, the founder and chairman of JD Wetherspoon, welcomed the beer tax freeze but says more needs to be done to close the tax gap between pubs and supermarkets.

“We will examine how much of the tax differential will remain after this move,” he said. “We maintain our view that anything less than equality is an untenable distortion and economically counterproductive.”

universal credit reforms

Also part of the back-to-work budget were a number of benefit changes designed to encourage more people to return to work.

Hunt announced a series of reforms that he said will “remove barriers that prevent people who want to work” as part of what he has termed the “back-to-work budget.”

The government plans to abolish the work ability assessment and separate the right to benefits from the right to work.

“Beneficiaries will be able to seek work without fear of losing their support,” he said.

The Chancellor said he will also aim to get more people into work by tightening rules around Universal Credit for jobseekers.

Hunt found that there are more than 2 million unhealthy job seekers who are looking for work or have low incomes.

“Sanctions will be more severe for those who fail to meet the strict job search requirements or who do not accept a valid job offer,” he said.

No recession in 2023

Alongside the new measures, Hunt also unveiled the OBR’s latest projections for the economy.

Previous OBR forecasts had predicted a recession in 2023, but Hunt said one is no longer expected.

The economy will still contract by 0.2% but will not meet the definition of a recession, meaning two consecutive quarters of negative real growth. The economy will then return to growth over the next four years.

Inflation is expected to fall to 2.9% by the end of 2023 from a peak of 10.7% in the third quarter of last year.

The government will also meet its target of reducing debt as a percentage of GDP within five years.