Much of what Chancellor Jeremy Hunt is due to announce in his Budget has been heavily briefed, creating a clear picture of what his priorities will be.
The Chancellor has spent weeks being lobbied by stakeholders, businesses and MPs – but with little room for significant fiscal giveaways, his statement is expected to be considerably restrained which, for some on the Tory benches, could spark frustration.
A central theme to the Budget will be getting more people back into work. Mr Hunt is expected to announce an increase to the pension cap in a bid to stop professionals retiring early and increases to childcare allowances for benefit claimants to enable parents to work more hours.
Under the plans, the Chancellor is also expected to introduce changes to the benefit system to encourage disabled and sick workers back into jobs, as well as support for older workers who may be on the brink of retirement.
When it comes to taxes, Mr Hunt is expected to freeze fuel duty – following a pattern from the last 12 years – and also unveil tax reforms to encourage investment in the UK by reforming capital allowances regime with bigger tax breaks for companies that invest.
He will also announce a heavily trailed extension to the support for energy prices and, as already announced by Prime Minister Rishi Sunak, defence spending will rise by £5bn over the next two years.
Despite sustained pressure from some Tory MPs, Mr Hunt is set to increase corporation tax from 19 to 25 per cent in April, when the super deduction expires. The Chancellor is understood to be going ahead after being told that freezing the rate would cost £18bn. He said on Sunday that cutting taxes would be his priority, but that he must act “within the bounds of what’s responsible, we will always look to cut the tax burden”. Despite being clear about what he intends to do for businesses, there is likely to be some frustration from groups of the party – specifically backers of former PMs Boris Johnson and Liz Truss, that the Chancellor is not being more ambitious on this.
Mr Hunt is also set to ruffle some industry feathers with plans for a higher alcohol duties which were announced in 2021 but delayed by six months until August. The Chancellor has ruled out further extending the introduction of the scheme despite warnings that it could place too much of a financial burden on producers and the hospitality industry. The new regime will see drinks taxed on the basis of how much alcohol they contain, but the level of duty is not yet confirmed.
A key dividing line between the Government and Labour will be the energy support for households. While ministers are expected to extend current help, with it set to continue for another three months from April, the bone of contention will be the way it will be funded. Labour has been pushing for the existing windfall tax on oil and gas giants to be strengthened and backdated in order to pay for the help but the PM is reluctant to do this. As a result, the additional help for families with high energy bills would likely be funded through existing headroom or more borrowing.
In every Budget, there is a rabbit pulled out of the hat by the Chancellor. This year, the surprise announcement could be anything from a boost in free childcare to promises of more funding for the NHS in an attempt to increase the workforce – and stave off further strikes and staff shortages. Either way, all eyes will be on how these expensive announcements might be funded.