Spring budget 2023: when is it and what to expect

The chancellor is preparing to deliver his spring budget tomorrow. We look at what changes could be announced, and how they’ll affect the pound in your pocket

Chancellor of the Exchequer Jeremy Hunt
(Image credit: Bloomberg)

The chancellor, Jeremy Hunt, will present his spring budget  tomorrow. It will be his second statement since becoming chancellor.

It follows November's Autumn Statement, which attempted to calm markets by reversing some of the tax cuts in former chancellor Kwasi Kwarteng’s disastrous mini-budget.

While some announcements have already been unveiled by the Treasury, there are plenty of rumours swirling about what else could be included in the spring budget - plus a growing wish list from charities and thinktanks.

More help for energy bills, improvements to ISAs, free childcare for one and two-year-olds and an extension to the fuel duty cut are some of the things that are being called for, and could potentially be announced later tomorrow.

We look at what might be in the famous red box, and how it could impact your bank balance and personal finances.

Spring budget 2023

What is the spring budget?

The spring budget is an opportunity for the chancellor to provide an update to the House of Commons - and to the public - on the state of the UK economy, and announce any plans for spending and taxes.

The changes announced could affect people - from students and employees to homeowners, investors and pension savers - or businesses.

Accompanying the statement is a forecast from the Office for Budget Responsibility (opens in new tab), which assesses the impact of government policy decisions and gives predictions for the future health of the economy.

There is normally one budget each year, and another fiscal statement too, for example, a spring budget and an autumn statement. At times of crisis, or perhaps due to a change of prime minister, there can be an extra statement, like last November’s Autumn Statement

When is the spring budget?

Chancellor Jeremy Hunt will unveil his spring budget on Wednesday, 15 March 2023. The budget speech is usually read out to parliament at about 12.30pm, following prime minister's questions.

In December, Hunt told MPs: “Today I can inform the House that I have asked the Office for Budget Responsibility to prepare a forecast for March 15, 2023 to accompany a spring budget.”

As well as the speech read to parliament, there is a lengthy budget document containing more detail about policy changes, and the costs involved. There are often consultations and policy papers published on the Treasury website (opens in new tab) too. 

What's been announced so far?

The chancellor has already made a series of announcements, with more detail to come in the spring budget. For example, he has announced:

  • The “prepayment meter penalty” will finish in July, cutting energy bills for over four million families. 
  • Hundreds of thousands of benefit claimants will be asked to attend more regular meetings with work coaches, while skills bootcamps will be expanded and the Work Capability Assessment will be scrapped. 
  • The government will start paying childcare costs on Universal Credit upfront, rather than in arrears. The maximum amount people can claim for childcare on Universal Credit will also be increased by several hundred pounds. 
  • An additional £33 million over the next three years will support veterans, in recognition of the sacrifices they’ve made for the UK. 
  • £63 million of new government cash will support public leisure centres with swimming pools. 
  • A “clean energy reset” will invest £20 billion in transforming carbon capture in Britain, helping create up to 50,000 highly skilled jobs. 
  • People who refuse to stop promoting tax avoidance in the UK could face criminal charges and serve time in prison. 
  • A simpler customs system for exporting and importing goods. 
  • 12 Investment Zones will be revealed in the budget, each backed with £80 million to drive business investment and “level up”. 

Spring budget 2023 rumours

Tax cuts are unlikely

While many of us squeezed by high inflation would love to see some tax cuts, it currently looks unlikely that Hunt will announce any immediate cuts on 15 March.

Chris Etherington, tax partner at the accountancy firm RSM (opens in new tab), said: “Tax cuts may yet be announced in the spring budget, but it seems likely these will be long-term promises that are unlikely to provide any immediate relief for taxpayers.”

There is also doubt over whether the basic rate of income tax will fall over the next few years, as previously promised by prime minister Rishi Sunak.

During the Conservative leadership contest last year, Sunak said he would seek to follow through with his promise to reduce the basic rate of income tax from 20% to 19% in 2024, and to 16% by the end of the next parliament in 2029. 

In January, HMRC published figures showing that the estimated cost of cutting the basic rate to 19% is £6.85bn for the 2024/25 financial year. 

Etherington commented: “The political and economic landscape has clearly shifted since the war of words with Liz Truss on tax cuts in the leadership contest. Based on the figures published by HMRC, it seems even more likely the chancellor will say this is a measure the country cannot currently afford.”

Likely help for energy bills

The Energy Price Guarantee (EPG) currently limits the average annual household bill to £2,500 is set to £3,000 on 1 April.

The increase will put pressure on households struggling to pay for gas and electricity bills, who will also lose the £400 energy discount at the same time.

Moneysavingexpert founder Martin Lewis and campaign groups such as Citizens Advice are urging him to keep the EPG at its current level of £2,500 a year for a typical household. More than 85 organisations and charities have so far joined the campaign for the government to postpone the EPG hike

And it looks like the pressure on the government has worked, with many media outlets reporting that the chancellor will confirm in his budget that the EPG is set to continue at £2,500 for typical households until at least July.

But remember, the EPG isn't a total cap on your bill, it simply limits the unit price of energy - so the more you use, the higher your bill will still be.

Almost 100 charities and non-profit organisations are also calling on the government to look at creating  “social energy tariffs”, which provide cheaper gas and electricity for low-income households. Last month, the energy regulator Ofgem said it was looking at the feasibility of this “with urgency”. 

Meanwhile, the National Institute of Economic and Social Research (NIESR) is calling for a variable price cap (opens in new tab) whereby the price of energy rises with usage.

Hunt has previously said it’s unlikely households will get extra help with energy bills when the EPG rises in April. He said he didn’t think the government had the "headroom to make a major new initiative to help people".

But, energy secretary Grant Shapps has since said that he is "very sympathetic" to suggestions that the government should stop the £500 increase in annual energy bills.

Shapps said he was working "hard" with the chancellor on the issue.

Fuel duty cut could be extended

Last spring, the then chancellor Rishi Sunak announced a 5p cut per litre to fuel duty. This is due to finish at the end of March 2023. 

There is speculation that Hunt could extend it for another year, which would be very welcome for drivers dealing with high pump prices.

However, the Social Market Foundation, a thinktank, cautioned against extending the fuel duty freeze, saying it would mean a loss of £5.5 billion each year to the public finances and mainly benefit the richest.

The SMF said: “Labour has called for a duty freeze and the government is considering making last year’s temporary 5p-per-litre cut into a permanent policy – the largest fuel duty cut in history.

“Freezing fuel duty yet again would obstruct the UK’s commitments to net zero transport and would hardly help out the most vulnerable. Instead of handing £5.5 billion a year for motoring, that money could be used to provide new buses and rail hubs for rural communities, alternatives for those stuck in expensive car ownership, finance green industrial growth, and deliver on more pressing needs.”

Call for extra childcare funding

The Confederation of British Industry (CBI) is lobbying the chancellor to announce extra funding and changes to childcare and early years support in his spring budget.

This includes extending free childcare to one and two-year-olds.

The CBI said it was an immediate economic priority as it would help get more parents into work and tackle acute workforce shortages.

A handful of Tory MPs are also calling on Hunt to cut the cost of  childcare. This includes making changes to reduce the cost of nurseries and making it easier for parents to apply for tax-free childcare.

Former prime minister Liz Truss previously called for changes to the childcare system.

It is understood that Department for Education officials have submitted a plan to the Treasury, for a free 30-hours-a-week entitlement for working parents of children aged nine months to three years. 

There are rumours this could be rejected for this month’s budget, with the chancellor preferring to save a big (and expensive) childcare announcement for the Conservatives’ manifesto at the next election.

However, as noted above, the Treasury has already announced that the government will start paying childcare costs on Universal Credit upfront, rather than in arrears. The maximum amount people can claim for childcare on Universal Credit will also be increased by several hundred pounds.

Potential state pension age rise

The state pension age is being reviewed again, and there are reports that any change to the age could be announced in the spring budget.

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

But the review into the state pension age could recommend that the increase to 68 be moved forward to the mid-2030s.

Tom Selby, head of retirement policy at the investment platform AJ Bell, said: “From the Treasury’s perspective, bringing forward the increase could be a huge money spinner, likely raising tens of billions in revenue - funds that are desperately needed in the wake of the pandemic and the costly energy support package.”

Bear in mind that even if there is no announcement about the state pension age on 15 March, the government has committed to publishing the review by May, so it’s only a matter of time before we hear about any changes to when you can claim your pension.

Changes to pensions taxation

The chancellor is widely expected to raise the annual and lifetime pension allowances, largely to encourage older professionals to stay in or return to work. 

The annual and lifetime pension allowances are £40,000 and £1,073,100 respectively. The annual allowance is how much you can contribute into your pension while still getting tax relief each year. The lifetime allowance is how much you can build up in total across all your pension pots (bar the state pension) before facing a tax charge of up to 55% on the excess when you take your pension. 

The government has gradually reduced both allowances in recent years, meaning more and more people have been caught by this tax rule that was originally designed to impact a small minority.

Jason Hollands, managing director at wealth manager Evelyn Partners, said: “If the chancellor is set to abandon the planned deep freeze on the pension lifetime allowance and annual pension contribution limits, this will be welcome news after the tax raids announced in his Autumn Statement. In the case of the lifetime allowance, investment growth is included so someone who has made wise investment decisions can be penalised with a tax charge which many will regard as unfair.”

Higher and additional rate taxpayers would be able to put more money into their pensions and receive marginal tax relief.

But the impact of the allowances does not just affect the wealthy. The allowances also penalise people who return to the workforce after they have used the pension freedoms from age 55. 

Canada Life, a financial services company, estimates between 500,000 and 1 million people are affected by the annual allowance restrictions. 

Canada Life’s Tully said: “Penalising people who either return to the workforce or attempt to replenish savings having used the pension freedoms as designed feels wrong. This isn’t an issue for the wealthy, our figures show someone who has flexibly accessed their pension, earning just over £33,000 and, together with their employer, contributing 12% will be caught by this tax charge.”

Public sector pay deal

The Government may announce a public sector pay deal to try to bring the unrelenting flow of strikes to an end.

At the moment, budgets allow for a 3.5% public sector pay rise. The Chancellor may go further and announce a 5% increase. 

Hunt needs to balance calls from public sector workers with the Bank of England, which is raising interest rates to bring down inflation and has warned that large pay settlements could fuel price rises. 

A plea for simpler ISAs

Previous chancellors have enjoyed unveiling new ISAs - junior ISA, help-to-buy ISA, lifetime ISA, the list goes on - and beefing up the annual ISA allowance. The announcements have normally been met with a positive response, as savers and investors realise they can stash more of their cash away from the taxman.

While it’s unlikely Hunt will pull a rabbit out of a hat and announce a new savings product in this budget, one commentator is actually asking the chancellor to simplify the ISA range.

The investment platform Interactive Investor (opens in new tab) says “there are too many ISAs”, and the ISA landscape has become “bafflingly complicated”.

In its submission to the government ahead of the spring budget, it has recommended that the lifetime ISA, help to buy ISA and innovative finance ISA be scrapped, leaving a simpler trio: the cash ISA, stocks and shares ISA and junior ISA.

Meanwhile, the wealth manager Hargreaves Lansdown (opens in new tab) is calling for the lifetime ISA to be reformed. It says the £450,000 cap on the value of a first home bought with a LISA should be increased in line with house price growth. It also wants the 25% penalty to access a LISA early to be permanently reduced to 20%. 

Getting over 50s back into work

 

To get the UK economy moving in a positive direction, the chancellor is set to unveil a series of measures to get retirees back into the workplace.

The Resolution Foundation, a think tank, recently said three-quarters of the rise in economic inactivity is concentrated among those aged 50 and over.  

 The government could encourage people out of retirement or support people back to work from long-term sickness absence. It could join forces with local businesses to help the 50s back into work. 

Andrew Tully, technical director at Canada Life, said: “This is a complicated area and there will be no one-size-fits-all approach, with the chancellor treading a fine line to avoid alienating any one cohort of society.” 

One option could be to tweak the Universal Credit system to encourage claimants to move into work or increase their hours.

A recent report by think tank Phoenix Insights warned that the average wealth of 50-64-year-olds who are economically inactive due to ill health is just £57,000, less than 5% of the average wealth of those who chose to retire early. 

The chancellor is also due to axe the system used to assess eligibility for sickness benefits, which means claimants can continue receiving payments after they return to employment. This would help encourage people back to work after a long-term sickness.

Ruth Emery

Ruth Emery is contributing editor at The Money Edit. Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.