Let’s have a look at some of the key changes announced in Jeremy Hunt’s Spring Budget earlier today.
Pensions
Hunt announced that the pensions lifetime allowance was to be abolished, meaning more people can save unlimited amounts into their private pension without incurring a tax charge.
He also announced an increase in the tax-free yearly allowance for pension contributions, taking it from £40,000 a year to £60,000 a year.
Fuel, Alcohol and Tobacco
The 5 pence cut to fuel duty on petrol and diesel was due to end in April but Hunt has announced a freeze of fuel duty for another year, helping keep down costs for motorists.
Tax on tobacco is set to rise by 2% above the rate of inflation, or for rolling tobacco, 6% above inflation.
Most alcohol duties will be rising in line with inflation as of August, meaning supermarket prices for booze will increase. However, Hunt has also mentioned a draught relief scheme to be implemented from August 2023 which should keep pint prices in pubs down.
Energy
Energy bills for the typical British household were due to rise to £3,000 a year from April but the energy price guarantee has now been extended until the end of June, keeping this figure at £2,500 instead.
Hunt has that the government will invest £20 billion over the next 2 decades into low carbon energy projects.
Nuclear energy will now be classed as environmentally friendly for investment purposes, meaning it will qualify for the same investment incentives as renewable energy.
Hunt has also stated that £63 million will be given to leisure centres to help them cope with rising swimming pool heating costs and investment to become more energy efficient.
Childcare
One of the main highlights of the budget is the expansion in state-funded childcare. Hunt has promised up to 30 hours a week of free childcare for eligible households with children as young as 9 months. This won’t be fully implemented until September 2025 but will be rolled out in stages from April 2024.
Families on universal credit are set to receive childcare up front rather than in arrears. Instead of a cap of £646 per month per child, this will now be increased to a maximum of £951.
Hunt has further announced relaxed rules in England to allow childminders to look after more children.
He’s also increasing the funding paid to nurseries providing free childcare by £204 million from September this year, rising to £288 million next year.
Corporation Tax
Corporation tax will indeed be increasing, taking it from a 19% tax on taxable profits over £250,000, to a 25% tax. However, Hunt has also announced a new policy of full capital expensing over the next 3 years which will allow companies to deduct money invested into new machinery and technology from their profits, helping to reduce their tax liability.
Support for the Vulnerable
Hunt has announced a new system of Universal Support across England and Wales. This is a new voluntary employment scheme for those who are disabled or have health conditions. Up to £4,000 per person will be invested to help support around 50,000 people a year in finding suitable work which caters to their needs.
Hunt has also announced funding of:
£400 million for mental health and skeletal support
£3 million to help those with special needs to enter the workforce
An additional £10 million over the next 2 years to help charities in England who work in suicide prevention
Other Notable Points
-£200 million this year to help local councils in England repair potholes
An extra £11 million in defence budget funding over the next 5 years
by Red Star Wealth
Government plans for a new law on minimum service levels during industrial action could leave workers being denied their right to strike.
Waves of Strikes
There is a seemingly constant wave of strikes recently due to huge hikes in inflation without adequate wage increases to match. This is causing huge amounts of disruption for the UK public, which can certainly be frustrating, but that is the point of strikes!
If we can recognise that these workers striking is causing this much disruption, we can also recognise how much we rely on their service. If we need their services this much to go about our daily lives, surely we can also understand why they deserve to be fairly paid.
If we take nurses as an example, their average pay has failed to increase in line with inflation or with private sector wage increases for over a decade, meaning real wage decreases over time. Over the course of a year between 2021 and 2022 in England, 1 in 9 nurses left active service. We need to ask ourselves why, and the answer seems quite clear… why would people want to work somewhere heavily understaffed, where they are overworked and underpaid?
Since June 2022, many workers have undergone strikes, including (but not limited to) the following professions:
Rail employees
Civil servants
Nurses
University staff
Border force staff
Ambulance workers
Midwives
Postal workers
Physiotherapists
The Strikes Bill
The Trade Union and Labour Relations Act 1992 has protected employee rights for decades and this protection is now at a real risk of erosion. The Strikes (Minimum Service Levels) Bill would amend the 1992 Act to “enable employers to issue work notices to require the minimum service levels to be delivered for particular strikes in specified services.”
The Union would then be expected to take reasonable steps to ensure the compliance of their members, and if failing to do so, would face paying huge damages. The Bill would essentially force Unions to go against the best interests of their members.
Its Implications
The Strikes Bill has now been passed in the House of Commons (315 votes to 246). It now needs to pass through the House of Lords to come into force.
Grant Shapps, the Secretary of State for Business, Energy and Industrial Strategy, has claimed that Labour, and others in opposition, are “putting lives at risk” by planning to vote against this bill.
However, many have criticised it for removing workers’ rights. If the bill passes, hundreds of thousands of people working in the public sector will be unable to exercise their right to strike. This means that many who have democratically and legally voted for strike action will be required to work during periods of industrial action, and face being sacked if they fail to comply.
The Trades Union Congress have described the bill as a “draconian piece of legislation” and that “forcing unions to send their members across picket lines is a significant infringement of their freedoms.”
UNISON assistant general secretary, Jon Richards, has described it as “a bill that gives all powers to the government and infringes workers’ rights, undermines democracy and doesn’t allow proper oversight by Parliament.”
If you enjoyed reading this blog, you might enjoy our previous post discussing the Government’s new statutory code on ‘fire and rehire’ practices.
by Red Star Wealth
In his first speech of 2023 last week, Rishi Sunak announced that he wishes to implement plans for all pupils to study maths until age 18.
Sunak’s Reasoning
Sunak is stressing the importance of numeracy as “our children’s jobs will require more analytical skills”.
He also said that he wants people to feel “more confident” when it comes to finances and mortgage deals. If this is the case, why not supply financial education instead?
Ambition without Substance
At this moment, Sunak’s plans seem entirely unattainable given that he’s failed to give any indication as to how they will be achieved.
There are no new qualifications immediately planned and no plan to make A levels compulsory
There is an enormous shortage of maths teachers. In 2021, there were under 36,000 maths teachers in English state secondary schools, compared to 39,000 English teachers and 45,000 science teachers. Sunak has not stated how he plans to magic up more maths teachers to carry out his plans
Sunak has not said what his plans will mean for those studying humanities or creative arts qualifications
Currently, it seems like more of an empty aspiration than a concrete plan…
The Importance of Financial Education
Whilst financial education and mathematics have areas of overlap, the two should not be conflated… they are not the same thing.
If Sunak’s plans go ahead, we need to make sure that this studying of maths is something that can actually be applied to the real world. Whilst a strong grasp of maths can help with aspects of financial management, such as budgeting, it does not overlap with all financial needs.
For example, studying maths might help you understand how percentages work. However, a financial education carries this even further as you can start using these percentages in the ‘real world’, such as with taxes. Instead of simply understanding the percentages of each tax band, you can know what to do if you are taxed wrong, what the different tax codes are, how to fill out your own self-assessment tax returns, and so much more.
Sunak says he wants people to feel “more confident” in managing their finances and understanding things like mortgage deals. In that case, surely we should be providing a meaningful financial education to pupils instead? Understanding the numbers is not enough…
If you want to read more about the importance of a meaningful financial education, click here.
by Red Star Wealth
In yesterday’s Autumn statement, Hunt announced £30 billion worth of spending cuts and £24 billion worth of tax rises over the next 5 years. This increased taxation and cuts to government spending is aimed at rebuilding the economy after instability from the Covid pandemic, Truss and Kwarteng’s failure of a mini-budget, and the ongoing war between Russia and Ukraine.
“Stealth Taxes”
Income tax’s personal allowance, the main national insurance thresholds and inheritance tax thresholds have been frozen for a further two years.
Some members of the opposition have branded these as “stealth taxes”. This is because the freezes effectively means that people will have to pay more tax as wage increases (due to inflation) will push them into higher tax brackets.
This payment of higher taxes alongside continuing inflation will mean the cost of living crisis will be hitting us all even harder.
Higher Rate Tax Payers
Currently, those earning between £50,271 and £150,000 a year fall into the higher rate income tax band of 40%. Those earning above £150,000 a year then pay the additional rate of income tax of 45%.
As of April 2023, this threshold will reduce from £150,000 to £125,140, meaning higher earners will be paying more tax.
Protecting the Vulnerable
Hunt has announced additional cost-of-living payments for the most vulnerable:
£900 for those claiming benefits
£300 for pensioners
£150 for those on disability benefits
He has also introduced a cap on the increase in social rents, at a maximum of 7% in the 2023/2024 tax year.
The triple lock on pensions has been maintained, meaning state pensions will increase in line with inflation. Working age and disability benefits are also to increase in line with inflation.
The national living wage is to increase by 9.7%, rising to £10.42 in April 2023, which will benefit the lowest-paid employees in the UK.
Funding the NHS, Schools and Social Care
Hunt has announced an extra £2.3 billion per year to be invested in schools over the next two years.
He has also announced an increase in the NHS budget by an additional £3.3 billion in each of the next two years.
Additionally, Hunt has allocated adult social care additional grant funding of £1 billion next year and £1.7 billion the year after. As well as this, the implementation of the Dilnot reforms has been delayed by two years. These reforms would cap the amount any one person in England would have to pay towards social care to £86,000. Delaying this means we will have more funding for the social care sector.
Energy and Electricity
In May 2022, Rishi Sunak introduced a tax as chancellor called the Energy Profits Levy. This was a 25% surcharge applied to companies profiting from extracting UK oil and gas, and was to run as a temporary levy until the end of 2025. In yesterday’s Autumn statement, Hunt announced that this windfall tax will increase to 35% from January 2023 and will also stay in place for longer, until March 2028.
A temporary new electricity generator levy will also be introduced. This will impose a 45% windfall tax on profits of selling electricity above £75MWh.
From 2025, electric vehicles will no longer be exempt from Vehicle Excise Duty (often referred to as Road Tax), which will help further raise Government funds.
It was also confirmed that plans for £700 million of Government funding into the Sizewell C nuclear power plant in Suffolk are to go ahead. This new nuclear power plant is expected to create 10,000 jobs and generate enough power for 6 million homes. The aim is to get the UK on the road to energy independence, so that we are no longer so heavily affected by changes in global gas prices in the future. It also signals the first UK state backing for a nuclear project in over 30 years. However, over the plant’s expected 13-17 years of construction, the government has predicted it will add an average surcharge of around £1 a month to household bills. This means that, yet again, our finances are likely to be under even more strain.
