Spring Budget 2023 rumours: what changes could Jeremy Hunt announce?

The Chancellor, Jeremy Hunt, will present his Spring Budget in the House of Commons on 15 March. But what changes can we expect him to announce?

While nothing is certain until the day, rumours are already swirling about what his plan for the UK economy will include. 

Here, Which? takes a look at some of the Budget predictions being reported in the press. We will update this story as and when new rumours are reported.

What is the Spring Budget?

The Spring Budget on 15 March is an opportunity for the Chancellor to provide an update to parliament and the public on the state of the UK economy since the Autumn Statement in November, and announce any further economic plans for 2023-24 and beyond.

The statement will be made in the House of Commons, alongside a forecast from the Office for Budget Responsibility (OBR). These forecasts assess the impact of government policy decisions and economic developments.

While there will be some changes unveiled, Spring Budgets don't tend to include any major shifts in policy, and Hunt has already signalled that his announcement will be a 'slimmed-down' fiscal plan.

Tax cuts look unlikely

Despite pressure from Conservative MPs, the Chancellor has reportedly ruled out tax cuts in the Spring Budget. It comes after the announcement of several measures in the Autumn Statement expected to squeeze many taxpayers from April. 

This includes an extended freeze on the personal allowance and most income tax thresholds. Having thresholds that fail to rise in line with salary increases mean you'll pay more tax on your income, particularly if you end up in a higher tax band as a result. 

Hunt announced last year that the additional-rate threshold would be reduced from £150,000 to £125,140, a move which it has been estimated will push around 250,000 more people into the highest band, paying 45% income tax.

However, there is hope among those in government that Hunt will set out plans for future tax cuts, especially given signs that the recession won't be as deep as previously thought.

Former cabinet minister Theresa Villiers told the Evening Standard: 'Everyone recognises that there are limits to what [Hunt] can do on tax at the moment, because of the huge costs of the pandemic and the impacts of the war in Ukraine. I think we would all like to see the Chancellor show there is a path to lowering taxes in the future.'

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Possible extension to the 5p fuel duty cut

Amid surging fuel prices, fuel duty on petrol and diesel was cut by 5p a litre last spring. This relief was due to end in March 2023, but there the Evening Standard has reported that the current Chancellor could extend it for another year.

Any freeze on fuel duty will depend on public finances, of course. But an extension could be very helpful to drivers, due to continued high pump prices. Average petrol and diesel prices were 155.3p and 179.1p per litre in December 2022, according to data from the Office for National Statistics.

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Energy cap still due to rise

Jeremy Hunt is unlikely to change his mind on raising the energy price cap to help households struggling to pay for rocketing gas and electricity bills.

The Energy Price Guarantee (EPG), which limited the average annual household bill to £2,500, was initially due to end in April 2023, but the Chancellor announced in the Autumn Statement that an updated version will run for an extra 12 months. 

However, the cap will increase to £3,000 per year, or £250 a month. 

Further cost of living payments are already planned for the rest of this year into the start of 2024: £900 for those on means-tested benefits, £300 for pensioners, and £150 for individuals on disability benefit.

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Pensions lifetime allowance could increase

There are predictions that Jeremy Hunt will increase the lifetime allowance (LTA) for pensions as part of a drive to encourage the over-50s back into work. 

The Daily Express has written that changing the LTA could be an option to encourage older people back into the workforce. 

The lifetime allowance is the limit on how much you can save in your pension pot before being hit with a tax charge. In 2022-23, the lifetime allowance remained at £1.073m and it is currently frozen until 2026.

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Potential early state pension age rise

The age at which you can access your state pension is currently set at 66 for both men and women. It's due to gradually increase to 67 by 2028, before slowly going up to 68 between 2044 and 2046. 

However, there are reports that a review into the state pension age will recommend the increase to 68 be moved forward to the mid-2030s, and that this change could be announced in the Spring Budget. It means millions of workers born in the 1970s may have to push back their retirement plans.

Bringing the state pension age rise forward means some workers will miss out on a full year of state pension payments, worth an estimated £13,594 for workers aged 57 and £16,902 for workers aged 46.

The change could also have a knock-on effect on workplace pensions, as you would have to withdraw money from a private pension earlier to fund your lifestyle if you wished to retire before 68.

In response, the Department of Work and Pensions (DWP) told Which?: ‘The government is required by law to regularly review the state pension age, the second of which will be published later this year.’

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source https://www.which.co.uk/news/article/spring-budget-2023-rumours-what-changes-could-jeremy-hunt-announce-ab4Oj3w32RGr
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