Budget 2023 predictions: what will Jeremy Hunt announce?

Businesses braced for downbeat affair as chancellor urges caution

Chancellor Jeremy Hunt
The chancellor is thought to be wary of deviating from his number one priority to bring down inflation
(Image credit: Leon Neal/Getty Images)

Jeremy Hunt will set out the government’s tax and spending plans for the year ahead as he delivers his first budget as chancellor on Wednesday.

Hunt said over the weekend that there were “no easy fixes” to boost the UK’s weak economic growth as he “paved the way for a Budget that will eschew big giveaways in favour of fiscal discipline and an effort to bear down on high inflation”, said the Financial Times (FT).

“I think we have fantastic opportunities in this country,” Hunt told the BBC’s Sunday with Laura Kuenssberg. “There is a hard road to follow to get there but we really can be one of the most prosperous countries in Europe, if not the world.”

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While the year ahead looks “far less malign than it did in the autumn”, said the BBC’s economics editor Faisal Islam, “the Bank of England and the International Monetary Fund (IMF) have pointed to medium-term challenges facing the British economy”.

Notably, the UK is the only G7 nation where the economy “has not yet returned to its pre-coronavirus pandemic size, with staff shortages weighing heavily on many firms”, said Reuters.

Given the “tumult we have seen in the Tory Party recently, the message that Hunt will want to send with that red box is one of stability”, said the BBC’s Islam.

No tax giveaway

Hunt has been under pressure from some Conservative MPs and business leaders to use the Spring Budget to roll out targeted tax cuts in a bid to stimulate growth. But major tax-cuts now seem unlikely, with Hunt telling the BBC it was important to be “responsible” with the public finances. “Conservatives cut taxes when they can,” he said, but countered that this would have to be “within the bounds of what is responsible”.

Businesses “are braced for a downbeat affair, with corporation tax set to increase from 19 to 25 per cent for firms making profits of more than £250,000”, said The Sunday Times. One bright spot for companies, though, “will be a successor to the ‘super deduction’, a two-year scheme, introduced by then-chancellor Rishi Sunak, that gave companies 130 per cent tax relief on purchases of equipment”, the paper added.

Boris Johnson is among the Tory MPs and business leaders calling for the planned corporation tax rise to be ditched, but so far the calls have been rebuffed.

The chancellor is caught politically, said the FT’s Stephen Bush. “On the one hand, further tax rises will cause howls of anguish from Conservative MPs. On the other, cuts to public services will trigger voter anger.” In fact, “one problem is that there aren’t really any options that either voters or Conservative MPs like”, said Bush.

Economic inactivity

In an interview with Sky News, Hunt pledged action on the high numbers of those deemed economically inactive.

“I will be systematically going through all the areas where there are barriers that stop people from working who want to, so that we can help people get back to work and fill those vacancies for our businesses,” he told the broadcaster.

The chancellor “will set out plans to encourage over-50s to return to work through an expansion of skills training”, said the broadcaster. Alongside this, “the system used to assess eligibility for sickness benefits will be scrapped, enabling claimants to receive payments even after they return to employment.”

The Universal Credit sanctions scheme is also to be “tightened”, reported The Independent, with thousands of claimants to be told to attend more regular meetings with work coaches, and “skills bootcamps” to be expanded by 8,000 places per year, up from 56,000, by 2025.

Childcare focus

The budget will also address rising calls for help with the cost of childcare. “The changes are much smaller in scale than the ‘big bang’ reforms Liz Truss was preparing as prime minister, which included a major expansion of free childcare,” said The Telegraph’s political editor Ben Riley-Smith.

Hunt is set to increase the amount that parents on Universal Credit can claim for childcare, but admitted it would be “expensive” to extend extra funding to all working families. Carers will also be able to look after five two-year-olds rather than four, which “brings the English rules into line with those in Scotland”, said Riley-Smith.

And there will be a £500 bonus for people signing on as childcare workers in a pilot scheme. The financial incentive is “designed to convince Britons to join the industry after problems finding employees fuelled a decline in the number of available childcare places”, said Riley-Smith.

Energy plans

The current Energy Price Guarantee has kept energy bills for the average home capped at around £2,500 a year, but is set to expire in April, when it will rise by 20% to around £3,000.

The chancellor “is expected to extend the programme at the £2,500 level by a further three months, at a one-off cost to the taxpayer of around £3bn”, said the i news site.

Additionally, prepayment meter customers “will no longer be charged more to receive their energy under reforms to be announced in the budget”, said The Guardian.

Fuel and alcohol duty frozen

The Treasury is “under huge pressure to keep the popular 12-year fuel duty freeze”, as well as the more recent 5p cut, said The Sun. But it “remains undecided on both policies – and officials in No11 are said to be concerned by the £6bn per year price tag”, said the paper.

The Sun also reported that alcohol duty will be frozen until August in what it calls “a major win for pubs and brewers”.

And there is some good news for drivers: the budget will include £200m to fill around four million potholes, according to the Daily Mail.

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Jamie Timson is the UK news editor, curating The Week UK's daily morning newsletter and setting the agenda for the day's news output. He was first a member of the team from 2015 to 2019, progressing from intern to senior staff writer, and then rejoined in September 2022. As a founding panellist on “The Week Unwrapped” podcast, he has discussed politics, foreign affairs and conspiracy theories, sometimes separately, sometimes all at once. In between working at The Week, Jamie was a senior press officer at the Department for Transport, with a penchant for crisis communications, working on Brexit, the response to Covid-19 and HS2, among others.