Today, the UK Chancellor Jeremy Hunt unveiled his Spring Budget for 2023. It included numerous measures aimed at returning people to work and weak attempts to tackle the cost of living crisis. This blog will break down the top 5 measures and cover them from a Scottish perspective.
Energy Price Guarantee Frozen
The maximum price energy companies can charge households for their bills will continue to be frozen at £2,500 for a typical household for the next three months. A freeze is always better than a rise but this will not be the news many families who are already struggling with their bills will welcome. The average bill will be kept at £2,500 but many households in Scotland already pay far more than that – Energy Action calculated the average Scottish bill is £1,000 more than in England.
Adding to this, the Winter Discount of £400 on energy bills is set to end in April, meaning that although the price cap has been frozen, bills for many will still rise. Through independence energy bills in Scotland would be considerably cheaper than they are now. Read more here.
Helping people back into work
A major theme of this budget was ending skill shortages left behind by the pandemic and the outflow of workers since Brexit. Brexit has left behind huge skill shortages in healthcare, hospitality and construction.
The Chancellor has announced that the government will expand free childcare to parents of one and two-year-olds, giving parents in England 30 hours of free care per week. This is a move entirely copied and pasted from the plan of the SNP as championed by Humza Yousaf throughout his SNP leadership campaign.
The Government will also look at spending £4,000 per person to find jobs for sick and disabled people, whilst also applying ‘more rigorously’ sanctions to those on Universal Credit. Once again the Conservative Government plans to fill skill shortages by forcing those who can’t work back into work.
Measures to help business investment
Brexit has been an unmitigated disaster for the UK and Scotland along with it. It has reduced GDP by as much as 5.5% and crashed business investment in the UK. In his budget, Hunt announced the creation of 12 new low tax zones, with only 4 of these zones being created in Scotland, Wales or Northern Ireland and 8 in England.
In addition to this, Hunt announced the planned increase in corporation tax to 25% will go ahead. However, only 10% of corporations will pay the full amount and the Treasury will allow them to deduct investment costs from their annual profits.
The measures announced in today’s budget will do little to replace the more than £1,250 per person Brexit is going to cost over the coming years. Scotland has already been disproportionately affected by Brexit given that we export more goods per head than the rest of the UK. Read more here.
OBR updated economic forecast
Alongside the Budget, the Office for Budget Responsibility published their new forecasts for the UK economy. The OBR forecast that the UK economy is set to contract by 0.2% in 2023. This means that the UK economy remains the only member of the G7 whose economy will contract this year, as previously forecast by the IMF. Brexit, and the failed policies to tackle the cost of living crisis, continues to leave the UK and Scottish economies far behind other advanced economies.
On trade, the OBR is forecasting that the volume of UK imports and exports will both be 15% lower in the long run than if we had remained in the EU. Brexit will also lead to a 4% reduction in the potential productivity of the UK economy. Brexit remains the lead cause of the UK’s economic woes.
The OBR has also forecasted that household disposable income- a key measure of real living standards- is set to drop by 5.7%. This is the largest two-year drop since records began.
Raising cap on tax-free pension allowance
The Government is set to raise the total amount a person can save into their pension before they have to start paying extra tax to 40,000 to 60,000 and abolishing the lifetime limit altogether. The aim of this policy is to discourage higher earning professionals such as doctors from reducing their hours or retiring early. This is also to deal with serious shortages of NHS doctors throughout the UK. However, this intervention only affects less than 4% of the total UK workforce. It also does nothing to assist the much larger number of pensioners that rely on the UK state pension or are unable to save up as much for their retirement.
These measures alone cannot solve the overall UK health staffing crisis caused by the shortage of doctors, nurses and other key workers. It also ignores the elephant in the room that is Brexit. Research has found that leaving the EU has worsened the UK’s shortage of doctors, particularly in anaesthetics and children’s health and has led to a loss of over 4,000 European doctors. Improving pensions for high earners is a sticking plaster on a much more serious problem.
Deputy First Minister John Swinney attributed recruitment issues in health and social care in Scotland to Brexit late last year. Despite the Scottish Government having a better understanding of the problem, Scotland does not have the power to mitigate Brexit’s worst impacts.
Chancellor Jeremy Hunt has previously co-authored a book calling for NHS privatisation. Is this really the man that we want to deal with the UK’s and by extension Scotland’s health service?
This budget does little to solve the real issues facing the UK economy; the cost of living crisis continues to decimate households across Scotland. Staff shortages caused by Brexit will continue to close businesses, keep ambulances waiting outside hospitals for hours on end and leave supermarket shelves empty.
That is why, in what might be a first for Business for Scotland, we agree with the Chancellor that ‘independence is always better than dependence’.
