Budget 2023: How Jeremy Hunt's announcement could affect you

Jeremy Hunt will have some difficult choices to make for the 2023 spring budget as the UK faces a cost of living crisis and sluggish economic growth

What's happening? Chancellor Jeremy Hunt is preparing to unveil his spring budget this week as he grapples with a cost of living crisis, public sector strikes and sluggish economic growth.

His announcement on Wednesday, 15 March, will reveal how much money the government will take in taxes and how it plans to spend it.

It follows a turbulent end to 2022, which saw Hunt's predecessor Kwasi Kwarteng send the financial markets into turmoil with his disastrous September "mini-budget".

Although the outlook for 2023-24 looks somewhat brighter, Hunt has suggested there is little room for "significant" tax cuts as he tries to stabilise public finances.

Here, Yahoo News UK explains what we can expect from the 2023 spring budget.

Support for energy bills

Energy bills are set to be high on the chancellor's agenda, as households across the country struggle to pay for heating and electricity.

The government's energy price guarantee, introduced in October, currently caps the cost of a unit of energy, with the average annual energy bill of a typical household at £2,500. This was set to increase to £3,000 in April.

A £400 subsidy to help families pay their bills, split over a six-month period, is due to end after March.

However, the chancellor and prime minister Rishi Sunak are under pressure to maintain the current level of support, according to The Times, meaning they are expected to perform a U-turn and keep energy bills capped their current level until July.

It remains unclear whether the government will go ahead with its plan to scale back energy bill support for businesses, who have also faced a challenging winter.

The £400 payment is not expected to be repeated.

Scene relating to the crisis in domestic energy prices.Female hands checking over the figures.
Households across the country have faced soaring energy bills over the past year. (Getty Images)

Public sector pay

The government is also under pressure to bring ongoing and widespread public sector strikes to an end by announcing a stronger pay deal for workers.

It comes after ambulance worker strikes in England were called off by the Unite union to enter pay talks with the government, suggesting both parties are one step closer to a resolution.

However, junior doctors took part in a three-day walkout on the week of the budget over conditions and pay - with Budget Day dubbed 'walkout Wednesday' as junior doctors, teachers, civil servants, tube workers and university staff take to the picket lines.

The Treasury had recommended a pay rise of 3.5% for nurses, teachers, police officers, dentists and doctors, but Sunak and Hunt are now thought to be considering 5% to prevent further strikes.

Although the Bank of England has warned large increases in public sector pay could further fuel inflation, it is understood the government has said a 5% hike would be "low risk".

Workers may even receive backdated payments, according to the Financial Times, although unions are unlikely to be happy with another offer below inflation.

People protest in front of the London Ambulance Service during a strike by ambulance workers due to a dispute with the government over pay, in London, Britain January 23, 2023. REUTERS/Henry Nicholls
The government could increase its pay offer to stop a continuous stream of public sector strikes. (Reuters)

Corporation tax

Corporation tax is expected to be increased from 19% to 25%, although the current rate will still apply to profits below £50,000.

This is despite calls from the right of the Conservative party to reverse this change, with former home secretary Priti Patel saying Hunt must "send a positive signal to business" in his budget.

Supporters of keeping corporation tax low argue it stimulates economic growth, but others are sceptical, and the government his under pressure to bolster public finances somehow.

When he was chancellor, Sunak announced plans to raise corporation tax from 19% to 25% in his March 2021 budget, which was temporarily reversed by Kwarteng.

At the time, Sunak said: "The government is providing business with over £100bn pounds of support to get through this pandemic so it is fair and necessary to ask them to contribute to our recovery."

LONDON, ENGLAND - MARCH 07: Prime Minister Rishi Sunak speaks during a press conference following the launch of new legislation on migrant channel crossings at Downing Street on March 7, 2023 in London, United Kingdom. The new plan will ban refugees arriving in the UK by small boats from today from claiming asylum. Home Secretary Suella Braverman has said the new legislation
Rishi Sunak previously proposed a corporation tax increase while serving as chancellor. (Reuters)

Getting retirees back to work

In a recent speech, Hunt said there are 6.6 million "economically inactive" people in the UK, excluding students – one million of whom are aged between 50 and 64.

The chancellor is expected to announce incentives for these early retirees to return to work in order to help businesses facing labour shortages.

Methods to attract people back into the job market could include offering tax incentives or tweaking pension rules.

For example, Hunt could increase the lifetime pensions allowance – the maximum amount you can draw from pensions in your lifetime without paying extra tax – which is currently frozen at £1,073,100 until 2026.

Senior couple sitting at the kitchen table with croissant and cups of tea, looking at digital tablet and recalculating their expenses.
Hunt could try and incentivise retirees back into work to help businesses with labour shortages. (Getty Images)

Fuel duty

As Britons continue to adjust to a global energy crisis, the chancellor is expected to suspend a planned 12p rise in fuel duty.

Current relief of 5p per litre – announced in the 2022 spring budget – is also likely to be extended for another year.

The move would cost the Treasury about £6bn per year, although this could be funded by an unexpected windfall of £30bn due to lower than expected public borrowing.

Fuel duty has not been increased for more than 12 years, and many Tories have warned the party's future could be at stake if a rise was to go ahead.