Spring budget 2023: five key announcements
Jeremy Hunt delivered what has been dubbed the ‘back-to-work budget’ on 15 March with multiple measures aimed at getting working aged people who aren’t currently working, back to the workplace. Key points in the spring budget included the expansion of free childcare hours, ‘returnerships’ for over-50s, and more support for people with disabilities or long-term health conditions.
In his speech, the chancellor unveiled his plans to grow the UK economy through a strategy that focuses on four pillars, or “four E’s”: Education, Enterprise, Employment and Everywhere. So, what did each pillar of the industrial strategy address?
- ‘Everywhere’ concentrated on measures to level up growth across the UK.
- ‘Enterprise’ focused on becoming Europe’s most dynamic economy by lowering business tax, reducing energy costs and supporting growth industries.
- ‘Employment’ brought forward reforms to remove the barriers that stop people who want to from working.
- ‘Education’ brought forward reforms to childcare including increasing the availability of childcare, reducing costs and increasing the number of parents able to use it.
We’ve compiled five key announcements from the spring budget and shared our initial thoughts on how they will impact employers so grab a brew and keep reading.
1. 30 hours of free childcare for every child over the age of nine months
Hunt acknowledged in his spring budget statement that the UK has one of the most expensive childcare systems in the world and that, as a result, “for many women, a career break becomes a career end”.
Consequently, he announced the government’s phased plan to expand the 30 hours a week of free childcare to include one and two-year-olds.
- Working parents of two-year-olds will be able to access 15 hours of free childcare from April 2024.
- From September 2024, that 15 hours will be extended to all children from 9 months.
- From September 2025 every single working parent of under 5s will have access to 30 hours free childcare per week.
Michelle Hobson, HR Services Director at Moorepay said: “This is a positive step forward that could allow 60,000 more parents to enter the workforce and will be worth up to £6,500 a year for working families. Alongside initiatives such as using KIT days, supporting employees returning from maternity leave and embracing flexible working, this is a welcome change that will undoubtedly boost recruitment and retention whilst building more diverse workplaces and helping to close the gender pay gap”.
2. Support for long-term sick and disabled individuals
Hunt explained the introduction of Zoom, Teams and new working models has made it easier for employees to work from home and in some situations these models can help those with disabilities and/or long-term sickness who are returning to work.
He announced a new voluntary employment scheme called Universal Support for disabled people. As part of this, the government will spend up to £4,000 per person to help them find suitable jobs and put in place the support they need.
Hunt also explained the government want to help individuals who are forced to leave work because of a health condition such as back pain or a mental health issue. In light of this he announced a £400m investment to increase the availability of mental health and musculoskeletal resources and expand placement and support schemes for individuals.
3. Reforming rules around pension contributions to discourage early retirement
It was a game-changing budget for pensions and key changes included:
- The Annual Allowance (AA) will increase by 50% from £40,000 to £60,000 per year.
- The money purchase annual allowance will increase from £4,000 to £10,000 per year.
- The tapered annual allowance will be updated.
- The lifetime allowance will be completely abolished.
Hunt said: “No one should be pushed out of the workforce for tax reasons,” and these measures are broadly to encourage older workers to stay in the job market and will undoubtedly reduce the temptation to retire early.
4. ‘Returnerships’ launched to get older people back into work
3.5 million of pre-retirement age over 50s are not part of the labour force, an increase of 320,000 since before the Covid pandemic.
Consequently, in an effort to attract “older workers” back into the labour market, Hunt said the Department for Work and Pensions intends to increase the number of over-50s benefitting from mid-life MOTs five-fold, from 8,000 to 40,000 a year. The Mid-life MOT is a review for workers in their 40s and 50s that helps them take stock of their finances, skills and health, and enables them to better prepare for their retirement and build financial resilience.
He also announced the creation of a new type of apprenticeship for the over 50s: returnerships.
The returnerships are a type of apprenticeship that will be targeted at over 50s who are keen to return to work. Hunt said these measures would focus on “flexibility and previous experience to reduce training length”.
5. 12 new investment zones
Jeremy Hunt announced 12 new investment zones and identified the following areas as having the potential to host one: West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. Successful applications will have access to £80 million of support for a range of interventions including skills, infrastructure, tax reliefs and business rates retention. There will be certain employer National Insurance savings within those investment zones.
The CIPP have commented that the Growth Plan of 2022 confirmed eligible employers in investment zones would benefit from a zero rate of employer NI contributions (NICs) on new (eligible) employee earnings up to £50,270 per year. However, by contrast, the Investment Zone Policy Prospectus, states that eligible employers will pay a zero-rate of employer NICs on any new employee working in the site for at least 60% of their time, on earnings up to £25,000 per year, in line with employer NICs reliefs in Freeports. This relief can be applied for a period of 36 months per employee. We’ll provide clarification as soon as it’s available.
What next for employers and how will the spring budget reforms impact businesses?
Clearly, a key focus of the spring budget was getting people back into work to boost the economy. The measures are expected to increase workforce participation targeting parents, the over-50s and the long-term sick and disabled. But what can employers do to attract and retain these demographic groups? Flexible working will be the key to success in creating an age-friendly and inclusive workplace. For example, flexible working arrangements can help parents with young children, or over 50’s with elderly parents, balance work with caring responsibilities they may have.
Over the coming months we’ll be continuing our conversations about the implications of the recent announcements so visit our Knowledge Centre for the latest updates.