2023 United Kingdom budget

Jeremy Hunt presenting the Spring Budget

Jeremy Hunt was appointed as Chancellor following the economic crisis brought about by the mini-budget of September 2022 and the subsequent resignation of his predecessor, Kwasi Kwarteng. Kwarteng had outlined a programme of unfunded tax cuts worth £45bn, most of which was reversed by Hunt as a result of a negative market reaction that undermined confidence in the UK economy. After taking office in October 2022, Hunt outlined an autumn statement the following month, which was a budget in everything but name, and included measures to lessen the impact of a potential recession.[1] On 19 December, he confirmed the next budget, which he described as a "full fat budget", would be presented on 15 March 2023, and that unlike the September budget, it would be accompanied by a report from the Office for Budget Responsibility.[2]

The March 2023 budget was presented against a backdrop of high inflation and weak economic growth, a cost of living crisis that had squeezed household budgets, ongoing strike action in a number of sectors, and concerns about a potential recession.[3] Although the predicted recession did not occur, data released by the Office for National Statistics on 10 February 2023 indicated the UK had narrowly avoided a recession at the end of 2022 following zero per cent growth during October to December. This was also despite a fall in output of 0.5% during December due to strike action being staged by various sectors prior to Christmas.[4] Data released on 10 March indicated the UK economy had grown by 0.3% in January 2023, much more than the 0.1% that was predicted by economists.[5] On 15 February, data indicated that inflation fallen for the third consecutive month, from 10.5% to 10.1%. This was mainly due to a decrease in fuel, restaurant, and hotel prices, according to the Office for National Statistics. But food inflation remained high, at 16.7%.[6] Pay, excluding bonuses, rose at an annual pace of 6.7% from October to December 2022, and when inflation was taken into account, regular pay fell by 2.5%.[7]

During a discussion about energy bill help in February 2023, Hunt told the BBC households were unlikely to receive extra help with their energy bills from April 2023, as he did not think the government had the "headroom to make a major new initiative to help people".[8] The Energy Price Guarantee, announced the previous September, was later extended until 30 June 2023.[9][10]

In his first full budget speech since becoming Chancellor,[11] Hunt set out what was described as a budget for growth, aimed at achieving long-term, sustainable economic growth for the UK. Its main objectives were to remove barriers to employment, encourage business investment, and address labour shortages in some industries. The Chancellor also announced a programme of tax cuts for business worth £27bn, as well as extending government help for families facing financial pressure as a result of the cost of living crisis.[12][13]

During his speech, Hunt confirmed that the Office for Budget Responsibility had predicted the UK would avoid entering recession during 2023, but that the economy would shrink by 0.2%. Economic growth of 1.8% was predicted for 2024, rising to 2.5% in 2025 then falling slightly to 2.1% in 2026. The UK's rate of inflation was predicted to fall to 2.9% by the end of 2023, down from 10.7% in the final three months of 2022, while underlying debt was forecast to be 92.4% of GDP in 2023, rising to 93.7% in 2024.[14][15] Government borrowing for 2022–23 was forecast to be £152bn.[16]

In his response to the budget statement, Sir Keir Starmer, the leader of the Labour Party and leader of the Opposition, accused the Conservatives of turning the United Kingdom back into the "Sick man of Europe" after presiding over more than a decade of economic stagnation and low wages: "Like millions across our country, this budget leaves us stuck in the waiting room, with only a sticking plaster to hand. A country set on a path of managed decline, falling behind our competitors; the 'sick man of Europe' once again."[24] He also highlighted a forecast from the Office for Budget Responsibility that predicted living standards in the UK would fall to their lowest since records began.[24]

Labour went on to criticise Hunt's decision to abolish the cap on the lifetime allowance for tax-free pensions contributions, claiming it could "could see the richest one per cent of those accessing their pensions next year net an average of £45,000". Rachel Reeves, the Shadow Chancellor of the Exchequer, said that Labour would reverse the changes, which Hunt claimed would encourage workers, such as NHS doctors and consultants, to stay in their jobs longer. Reeves announced that Labour would instead create a specific scheme for doctors rather than a "free-for-all for the wealthy few". But Labour were accused of exaggerating the figures. David Robbins, director of WTW, told The Financial Times the calculated tax saving for someone with £1.4mn of pension savings would be "less than one-third as big" as Labour had forecast.[25][26] The policy was welcomed by the British Medical Association, who described it as "potentially transformative for the NHS".[27]

Nicola Sturgeon, the outgoing First Minister of Scotland, welcomed the additional £230m announced for Scotland, but said it would still place great financial constraints on the Scottish Government.[22] Speaking on the 16 March edition of BBC One's Question Time, Stephen Flynn, the leader of the Scottish National Party in the House of Commons, highlighted what he felt was the lack of support for families struggling with the rising cost of living: "[P]eople can't afford to pay their energy bills. They can't afford to pay their mortgages; they can't afford to pay their rent. They can't afford to pay their food bills; they can't afford, some of them, to put clothes on their kids' backs or shoes on their kids' feet. And the Chancellor's answer to that was to keep energy bills at an astronomically high level while stealthily taking 400 pounds away through the energy rebate scheme. He wants old people and disabled people to pull up their socks and have an MOT and go back to work. He wants to give the richest people in society a tax break on their pensions. What planet do these people live on?"[28] Mark Drakeford, the First Minister of Wales and leader of Welsh Labour, described it as a "less than a bare minimum budget".[23]

There was also some criticism from backbenchers within Hunt's own party, with Jacob Rees-Mogg leading Conservative criticism of the budget, particularly over the decision to increase Corporation Tax by 6%, something he said would make the UK "less competitive".[29]

The BBC's Laura Kuenssberg noted the fairly uneventful reaction to the 2023 budget when compared to the criticism that had greeted the statements delivered in 2012 and March 2017, but questioned how easy it would be for Prime Minister Rishi Sunak to deliver on the promises that had been made. Highlighting the plans for expanding childcare, she observed that the number of available nursery places had been decreasing in recent years: "Ministers are aware that it could be a stretch: that is why the changes are being phased in gradually. But if the promise of more gleaming nurseries, happy toddlers and less-stressed parents is not matched by reality, the government may be punished."[30]

On 22 March, data released by the Office for National Statistics showed an unexpected increased in inflation for February, from 10.1% to 10.4%, largely as a result of an increase in the cost of fresh food (particularly vegetables), non-alcoholic drinks, restaurant meals, and women's clothes. In response to this news, Hunt said that reducing inflation from "dangerously high levels" was the government's priority.[31] The following day, the Bank of England raised its baseline interest rate for the 11th consecutive time, from 4% to 4.25%, in response to the unexpected growth of inflation.[32] Despite the increase, Andrew Bailey, the Bank's Governor, said that he was "much more hopeful" for the prospects of the UK economy. Hunt said the government supported the Bank's decision, but Reeves said a higher interest rate would cause concern to families struggling with the cost of living.[33]

Office for National Statistics data released on 31 March revised the economic growth figures for the end of 2022, and showed the UK economy grew by 0.1% in the final three months of 2022, meaning the UK had avoided recession. Hunt said the figures "show there's underlying resilience in the UK economy".[34]

On 25 April, data published by the Office for National Statistics indicated that government borrowing for the year up to 31 March 2023 had been £139.2bn, and consequently less than the £152bn forecast prior to the 2023 budget.[16]