British finance minister Jeremy Hunt set out his budget on Wednesday in an effort to pull the UK economy out of its run of stagnant growth.
Hunt said the Office for Budget Responsibility (OBR) reported that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.
He said the OBR forecast is that the UK will not enter a recession at all this year with a contraction of just 0.2%.
It said the UK economy will grow by 1.8% in 2024, 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027.
Scottish Tourism Alliance CEO Marc Crothall: “Today’s Budget announcement by The Chancellor brings a mix of some positive outcomes for Scotland’s tourism sector; the news from the OBR forecast that the UK will not enter a technical recession and that inflation will fall to 2.9% by the end of the year will be met with relief.
“However, the announcement that the government will press ahead with an increase in corporation tax will be met with real concern and anxiety by many.
“A significant number of businesses within Scotland’s tourism sector are currently on a cliff edge with the continuing rise in the costs of doing business, taxation and impact of the cost-of-living crisis. Revenue is down, costs are up and inward investment is impossible; survival is looking bleak. The increase in corporation tax will be a burden too heavy to bear for many, which will end up costing the UK Government more in terms of lost tax revenue.
“There is however some good news with the announcement of £8.6m funding for Edinburgh’s festivals; a huge security boost to our increasingly financially constrained culture sector. This will allow improved planning and marketing of festival events and bolsters the appeal of Scotland as an international destination.
“Scotland’s festival economy contributes more than £300m a year to the UK, so it’s heartening to see acknowledgement and recognition of the potential of Scotland’s tourism and culture sectors as future economic drivers for both Scotland and the UK.
“I know that many in the hard-pressed pub sector will welcome the announcement of the freeze on duty for draught products at a time of rising costs for all within the hospitality industry.
“The freezing of fuel duty and announcement of the extension to of the Energy Price Guarantee until June may offer some comfort to consumers and ease on domestic expenditure which could translate to the uptake of more leisure experiences within the tourism and hospitality sector.
“However, many businesses will be left disappointed that they will not receive an equivalent cap on their energy prices. Our recent Business Barometer highlighted that energy costs was the challenge most frequently identified by respondents.
“I look forward to hearing more around the detail of the announcement of at least one new investment zone in Scotland in due course, although we would most certainly wished to have seen a much stronger commitment by the UK government in levelling up more areas in Scotland which would benefit from the generation of economic growth.”
Kevin Brown, savings specialist at Scottish Friendly: “The government was left with little choice but to keep the energy price cap at £2,500 for another three months to help suppress households’ energy costs.
“From April, families will no longer receive the £66 discount on their bills, so it was vital to extend the cap and help protect families from another sharp rise in costs.
“Households continue to grapple with the biggest squeeze on living standards for a generation. Double digit inflation is decimating workers’ income and the government must maintain support for families until conditions significantly improve.
“As the Chancellor outlined today, getting more people back into work is a major priority to help boost the UK’s economic growth. But while inflation remains high and incomes continue to fall in real terms, encouraging people to return to the labour market is going to be a challenge.
“There are signs of brighter days ahead this year, but we are not out of the woods yet and it’s important that the UK’s finances aren’t prioritised ahead of family budgets.”
Scotland’s Deputy First Minister John Swinney: “This UK Budget is another missed opportunity to take meaningful action to lift families out of poverty, invest in our public services and help businesses so that our economy can grow.
“Instead, the UK Government should have taken more substantive action to increase the Scottish Government’s budget so we can better align spending and deliver for people and organisations right across Scotland.
“While reversal of the planned increase in the energy price guarantee is welcome, with the end of the energy bills support payments, average household monthly bills will still rise by almost a third in April, at a time when wholesale energy costs are falling.
“Rising interest rates combined with reduced support means some people are expected to experience a larger fall in living standards this coming year than they have over the last 12 months.
“An uplift on Universal Credit and extending this to legacy benefits would have made a meaningful difference to households struggling to make ends meet.
“The limited additional money for the Scottish Government’s Budget is welcome but will not go far enough and in the long-term our capital funding will fall in real-terms. Without extra funding, we will have to find money from within the Scottish Budget to invest in public services, provide fair pay rises and help people with the cost of living.
“The Scottish Government is doing what it can with its limited powers to ensure people receive the help they need, but the UK Government’s could have done far more to ease the burden affecting so many, demonstrating yet again why Scotland needs the powers of independence.”
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “Jeremy Hunt’s sketch of a plan for growth has turned into a blueprint with welcome detail on incentives aimed at increasing investment in the UK.
“Although there will be huge disappointment that he hasn’t budged on the jump in corporation tax to 25%, the full capital expensing scheme will offer some relief. It means that every pound a company invests in equipment will be offset but it’s still not as generous as the super- allowance which it replaces.
“Clearly the Chancellor is prioritizing areas where he believes the UK has a head start and could gain lots of ground in the future with the right support and tax breaks for R&D are right at the heart of the strategy.
“This is a hugely welcome development in a week when many smaller life sciences firms were facing an existential crisis with funding lines at risk of being severed following the SVB collapse. Now they’ll benefit from an enhanced credit, if they spend 40% or more of total expenditure on research and development.
“This is a big dose of financial persuasion to stay rooted in the UK and invest for the longer term. The much swifter approval for drugs with the shake-up of the regulatory procedure could be a game changer for pharma companies.
“Shares in companies like Hikma pharma and Astra Zeneca appear to have turned a bit of a corner in the past hour, though much will depend on how the new regime is implemented and how long it will take. Given the pressure weighing on markets today as worries about the banking sector whip around, it’s hard to strip out big positive signs from investors in reaction to the budget today.
“There will stars in the eyes of workers across film, TV and animation companies in the UK given a bigger tax break is now available for big firm investing here. There is an new enhanced tax credit of 34% on expenditure although the threshold is £1 million. This is clearly aimed at getting the big Hollywood players to keep pouring bringing in business and is a step up from the 22% previous relief.’’
Dean Butler, Managing Director for Customer at Standard Life: “Today’s pension tax reforms focused on higher earners and those towards the end of their careers, however for the majority of UK workers the risk of under-saving remains is the biggest threat to their ability to retire.
“Now working its way through parliament is a Private Member’s Bill which will allow the qualifying age for auto-enrolment to come down from 22 to 18 as well as removing the lower earnings threshold. This means people will be able to start contributions from the first pound of earnings which is an effective way to boost saving contributions.
“It seems any change to the percentage of salary contributed by employee and employers is off the table while inflation stays high, but further down the line we’d like to see minimum contributions increase to 12% to ensure savers currently in the earlier stages of accumulating their retirement savings stand a chance of benefiting from today’s reforms in the future.”
Steven Cameron, Pensions Director at Aegon: “The Chancellor pulled a massive rabbit from his Budget hat by scrapping the Lifetime Allowance, rather than a rumoured increase to £1.8m. This comes at the same time as the Annual Allowance is being increased by 50% from £40,000 to £60,000, and the Money Purchase Annual Allowance being raised from £4,000 to £10,000.
“It has always been excessive to have both a lifetime and annual allowance, effectively limiting not just how much can be paid in each year but how much you can hold on a tax favoured basis in total. With most people now in a defined contribution rather than a defined benefit scheme, it makes sense to focus on setting a limit on contributions rather than ultimate benefits. In a defined benefit scheme, having a lifetime allowance meant those who saved diligently could end up facing a tax penalty if they achieved good investment returns.
“Removing the lifetime allowance will also cut out a swathe of complex pensions tax rules. It will allow individuals who have stopped contributing for fear of exceeding it to consider restarting contributions. It may also, subject to any detailed provisions, allow people who have already started taking benefits to top these up.
“Not surprisingly however, the amount which can be taken tax free will be restricted to 25% of the current Lifetime Allowance of £1,073,100 or £268,275. Allowing 25% of an unlimited pension pot tax free would have been excessively generous.”
Ishal Chopra, Scotland head of tax at KPMG UK:
“Today’s Budget reflected a calmer footing when it comes to public finances than last Autumn’s, a situation which has resulted in no significant tax rate cuts or tax rises, but which did include some clear incentives for businesses investing in their futures”
“The Chancellor gave an upbeat forecast on inflation and announced that a technical recession was now not likely this year, news which will be welcomed by businesses and individuals.
“With an ongoing leadership race for Holyrood’s top job, this Budget gives the incoming First Minister an indication of how a new look Conservative leadership is approaching the economy …
“In terms of business taxes, the planned increase to the mainline Corporation Tax rate to 25% is going ahead despite concerns over the impact that this may have on UK competitiveness and investment.
“The big news in corporate taxation focused on capital expenditure where full expensing for qualifying spend on plant and machinery for the next three years has been introduced, as well as an enhanced tax credit in the R&D regime for certain small and medium sized enterprises.
“The Chancellor confirmed plans for an investment zone in Scotland with a focus on growth in five key sectors: life sciences, creative industries, digital technology, advanced manufacturing, and green industries where Scotland already has glowing credentials …
“Getting people back to work was a key area of focus, with the Government particularly concerned about the over 50s choosing to take early retirement. We saw an increase in pensions annual tax-free allowance and a complete abolishment of the pensions lifetime allowance, as well as new apprenticeships for over 50s, and significant funding to childcare provision to get new parents back into work …
“The £8.6m of funding for Edinburgh’s festivals will undoubtedly be a boost to one of the world’s leading cultural brands and stimulate growth to the wider culture sector in Scotland, as well as increasing employment opportunities.
“This was a quiet Budget in terms of other taxes such as VAT and duties, and personal taxes. It was a Budget marked by stability and hints towards continuing to support positive signs of financial improvement ahead of an election in the next 12 to 18 months.”
Sandy Begbie, Chief Executive of Scottish Financial Enterprise: “The UK Government budget is taking place at a time when many households and businesses are struggling with increasing costs and an uncertain economic outlook.
“It is therefore welcome to see today’s budget taking a considered approach to support vulnerable households, increase workforce participation, and to lay some foundations for sustainable, economic growth in key areas.
“Continued support for energy costs, the use of dormant assets to support vulnerable customers, and action on prepayment meters, are welcome actions for those who are hardest hit by the current cost crisis.
“There has clearly been some meaningful consideration of the reasons that different groups of people are leaving or not returning to the workforce, and the government’s plan to address this issue through varied measures like the increase of tax-free allowances for private pensions and increased childcare support will be helpful to improve workforce participation and boost productivity.
“On the economy and business, additional support for carbon capture, plans for at least one investment zone in Scotland, support for the festivals in Edinburgh, and tailored programmes of tax relief and incentives, are useful targeted actions for key sectors and the development of regional economic growth plans.
“Overall, this budget signals a constructive long-term approach to changes needed in our economy and aligns with many of the priorities we have been calling for.
“In time, we would like to see greater ambition and more incentives for businesses to invest, not only in machinery and technology, but also in areas like net zero transition, greater inclusion, upskilling and reskilling. We are not yet seeing the level of strategic ambition in these areas as in other advanced economies around the world who are competing internationally for the same private sector capital investment.
“We know these priorities are also important to the Scottish Government and this is an opportunity for a renewed focus on collaboration and engagement between both governments and with business to help address some of the significant structural challenges Scotland faces, such as low productivity and skills gaps.
“That must include a focus on Scotland’s world-class sectors, including financial services, where we have significant opportunities for growth and innovation, as well as the creation of highly skilled, well-paying jobs.”