Given the importance of the Chancellor’s Spring Statement, here is a summary including key hospitality industry takeouts.
The full report can be found here
In summary:
General
- The UK will not enter a technical recession this year. Supported by action taken at the Spring Budget, GDP is higher in the medium term.
- The Office for Budget Responsibility (OBR) reports that inflation will fall from 10.7% to 2.9% by end of 2023. The OBR then expects inflation to fall to 0.9% in 2024 and to remain near 0% until mid-2026. Inflation is then forecast to return sustainably to the 2% target by 2027-28.
- Draught Relief will increase from 1 August to freeze the duty charged on a typical pint of beer in the pub and ensure this will always be lower than in the supermarket.
- 7m adults of working age are not in employment (excluding students).
Business tax
- The UK has one of the most competitive business tax regimes in the world, with the headline rate of Corporation Tax continuing to be the lowest among G7 economies.
- There will be the introduction of full capital expensing – 100% First Year Allowance, from 1 April 2023 until 31 March 2026, with view to make it permanent.
- The outlook for business investment remains weak, but the OBR has judged that full expensing will help boost business investment by almost 3.5% in 2024-25 and 2025-26.
Business rates
- The government intends to expand the local retention of business rates to more areas in the next Parliament and will work closely with interested councils to achieve this.
Employment
- A comprehensive employment package will focus on four groups: the long-term sick and disabled, welfare recipients and the unemployed, older workers, and parents.
- More than 2.5 million people reporting that they are inactive due to long-term sickness.
- Universal Support programme in England and Wales to match people with disabilities and long-term sickness with jobs and provide support and training to help them succeed.
- Workers aged over 50 left the labour market in the greatest numbers during the COVID-19 pandemic. To encourage this group to extend their working lives, the government is increasing tax relief on pensions.
- The Lifetime Allowance charge will be removed from April 2023 before the Allowance is abolished entirely from April 2024, and the Annual Allowance will be raised to £60,000.
- 435,000 people in England with a child under 3 are inactive due to their caring responsibilities; many of these people report that they would like to work but cannot afford childcare.
- The government is expanding the support on offer by providing 30 hours a week of free childcare for 38 weeks a year, for eligible working parents of children aged 9 months to 3 years.
- This will be rolled out in phases from April 2024 and is in addition to the 30 hours a week already provided for eligible working parents of 3 to 4-year-olds.
- The government will also provide £204 million in 2023-24, increasing to £288 million in 2024-25, to substantially uplift the hourly funding rate paid to providers to deliver the existing free hours offers in England.
- The government will ensure that the UK labour market has access to skills and talent from abroad where needed. To help ease immediate labour supply pressures, the government commissioned the Migration Advisory Committee (MAC) to undertake a rapid Shortage Occupation List (SOL) assessment for the construction and hospitality sectors, ahead of its full review of the SOL concluding later in 2023.
- Strengthening employment rights – the government is supporting Private Members Bills that provide a day one right to request flexible working and grant specific groups protections or leave entitlements, including enhanced redundancy protection for pregnancy, family leave, carer’s leave, and neonatal care leave. In addition, the government is supporting bills to ensure that all tips go to staff and providing workers with the right to request a contract with more predictable hours.
Energy
- Retail energy costs are expected to remain historically high through the spring, so the government is maintaining the EPG at its current £2,500 per year level for an additional 3 months(April to June 2023).
- The planned increase to a level of £3,000 per year will therefore be implemented on 1 July, rather than 1 April as previously announced.
- The Energy Bills Discount Scheme willprovide all eligible businesses and other non-domestic energy users across the UK with a discount on high energy bills until 31 March 2024, following the end ofthe current Energy Bill Relief Scheme. It will also provide businesses in sectors with particularly high levels of energy use and trade intensity with a higher level of support.
Industry View
UK Hospitality Chief Executive Kate Nicholls, sets out the following in her statement.
- The measures announced today are significant in incentivising people back into work and hopefully alleviating crippling labour shortages. The wider economic forecasts also give us encouragement that consumer confidence and spending are in for an upturn, albeit over time.
- The significant reforms to childcare and the measures to help the over 50s re-enter the workforce are both areas on which UK Hospitality has been calling for action and we’re pleased the Chancellor has recognised the help it can offer tackling the enormous vacancies in hospitality.
- The sector is still set to see huge energy price increases when current support ends in April, which unfortunately was not addressed. It remains the case that we need to see urgent action on the market failures identified by Ofgem in its non-domestic review update yesterday. The current timeline of further action by the summer is not good enough.
- The reduction in draught duty is positive and we hope this will incentivise more visits to our pubs, restaurants and hotel bars. Addressing draught duty is a good start and I would urge the Government to consider rolling out this type of tax cut across the wider drinks market.
Full article can be read here.
Martin McTague, national chair of the Federation of Small Businesses (FSB), had the following views.
- We’ve got a Budget that on energy helps households but not small firms. On business taxes, it spends £27b extra on big businesses, arguing that small businesses are already catered for. This will leave to a feeling of being left behind instead of being considered equal partners in economic recovery – trickledown economics here simply does not work.
Emma McClarkin, chief executive of the British Beer & Pub Association had the following views.
- This budget was a make-or-break moment for pubs and brewers who have been running out of road for too long, and whilst the Chancellor’s efforts to support our pubs and breweries are welcome, we look forward to seeing how the “Brexit Pubs Guarantee” will deliver for our sector.
- The cut to draught duty as part of the alcohol duty reform is positive and we hope it will result in a boost for our pubs this summer.
- However, the fact is, our industry will be facing an overall tax hike, not a reduction come August. Duty on non-draught beer will rise and the measures introduced today won’t rebalance the catastrophic impact soaring inflation and unfair energy contracts are having on pubs and the breweries that supply them.
