Chancellor Jeremy Hunt delivered a back-to-work Budget – but there was little in it for the housing sector to get excited about.
But if there wasn’t much in it for the sector, there wasn’t any misery, either.
And he did announce some brighter news on the economy.
Before Budget Day, the Private Rented Sector (PRS) had called on the Chancellor for help to retain landlords, increase the supply of rented homes and tax incentives to improve the energy efficiency of tenants’ homes.
On the sales side, many commentators had called for cuts in Stamp Duty to stimulate future house sales.
But while there was little gain, there wasn’t much pain either. He didn’t increase taxes on sales of investment property, nor did he add to the Stamp Duty premium – two measures which had been hotly tipped as possible Treasury earners.
Instead, Mr Hunt chose to concentrate on measures designed to tempt early retirees and parents to return to employment in a bid to increase economic growth.
The good news for the sector came in the form of a new forecast by the Office of Budget Responsibility (OBR) which said they expected inflation to fall to 2.9% by the end of the year – from a high of 10.7% last November. The Government target is 2%.
Welcome news
Mr Hunt also offered the reassurance that the UK economy will not, despite earlier warnings, fall into a ‘technical recession’ in 2023.
A more stable economic outlook can do nothing but add positivity to an already-resilient market for sellers and the projected drop in the inflation rate will be seen as welcome news by everyone and will improve confidence right across the sector.
And in a further effort to help with the cost of living, Mr Hunt announced that the Energy Price Guarantee would continue until July – limiting energy bills for an average household to £2,500 per year.
But the main thrust of Mr Hunt’s fiscal plan was directed at stimulating growth by encouraging ‘economically inactive’ people back to work. He concentrated on two groups – parents of small children and the over-50s.
Children
In England, working parents of three and four-year-old children are already entitled to 30 hours a week of free childcare.
The Chancellor announced a staged extension to the scheme with 15 free hours of childcare for two-year-olds in April 2024, and in September 2024 for those aged over nine months, then 30 hours for all from September 2025.
He also increased funding for school-age children to receive before and after-school care.
Getting more parents back to work could provide a welcome boost for the mortgage market. Not only will it increase the family income, but some commentators have observed that childcare fees are taken into account by lenders and have a real impact on affordability.
Tax deductible
In an attempt to retain more doctors and consultants in the NHS, Mr Hunt abolished the tax-free limit on pension savings and although the annual allowance will remain in place, it was increased from £40,000 to £60,000.
And he announced a £63m ‘Returnerships’ programme for over-50s who may wish to go back to work in a different sector.
Despite some calls to scrap the plan, the Government’s planned increase in the main rate of Corporation Tax from 19% to 25% was confirmed. But it was also announced that capital investments will be fully tax deductible for the next three years, at least.
Other measures in the budget included:
- A commitment to increase the Defence Budget by £11bn over the next five years
- £200m for councils to fix potholes
- £900m investment in the UK’s AI sector
- £10m additional funding over the next two years for charities working to prevent suicides
- A 12-month extension to the freeze on fuel duty
- Tax breaks for the entertainment industry
- From July, a commitment to charge the pre-payment meter energy customers the same as those who pay by direct debit
- The abolition of the work capability assessment, allowing disabled people to take a job without fear of losing their benefit.
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