Spring Budget 2023: Bayes academics react to Chancellor’s statement

On Wednesday 15 March, Jeremy Hunt, Chancellor of the Exchequer delivered his 2023 Spring Budget. Academic experts from Bayes Business School (formerly Cass) have been giving their reaction to how Mr Hunt's statement will affect people and businesses of the UK.

Expansion of childcare support for one and two-year-olds

In an attempt to help young parents return to the workplace, Mr Hunt announced a boost to Government funding for childcare.

Dr Lauren McCarthy, Senior Lecturer in Corporate Social Responsibility at Bayes Business School said:

“Over previous weeks both the Conservatives and Labour have been vying for voters over proposed plans for more childcare support.

"The UK has the third highest childcare costs in the world, with no state support at all until children are three years old. Recent research shows that three-quarters of women with children under five say it makes no sense for them to work due to the spiralling costs of putting their children into nurseries or using childminders.

"We are seeing increasing numbers of women leaving the workforce as a result.

Childcare is both a feminist and economic issue – it’s a no-brainer for any government to tackle rising childcare costs and support parents and carers into work.”

Pensions savings

With the Government announcing a rise in the amount of pensions savings people can accrue before additional tax, Andrew Clare, Professor of Asset Management at Bayes Business School, said the rise would be directly beneficial to only a small number of people, but current limits needed to be changed.

Professor Clare said:

"The current limit is so punitive that doctors and other health professionals that we all rely on are withdrawing their labour.

"At a time when the health service is under such pressure, anything that can reduce this pressure should be welcomed.

"More generally, a tax system should not create a situation where people are better off not working. This country has enough problems generating growth already: the tax system should not be one of these problems.”

Jens Perch, Professor of Actuarial Science at Bayes Business School, said a targeted scheme for doctors would be more effective and less expensive.

“If the government wants to get doctors working then it should direct policies in that direction. What is being proposed is extraordinary expensive. You could increase doctors’ salaries obtaining the same effect for less.

“It is not so that anything that makes people work more is a good move. The suggested pension decision has too little benefit for too much cost. What we get here is just a slightly more subtle version of Liz Truss-Economics, and it will make the UK poorer than needed (again).”

Dr Russell Gerrard, Associate Professor of Statistics at Bayes Business School said it is only a matter of time before the UK pension age rises again:

“There is already a plan to raise the qualifying age to 68, though not until the 2040s, although this may be brought forward.

“The UK already has one of the highest pension ages in Europe, but the direction of travel across the board is for pension ages to increase, so it’s bound to happen eventually. It’s a question of when, not if.”

Les Mayhew, Professor of Statistics at Bayes Business School, said:

“I welcome changes to the pensions lifetime allowance which put a cap on how much pension people could accumulate before being hit by punitive taxes.

"The life-time allowance creates huge disincentives to those who wanted to work longer for longer but were financially disadvantaged, having done the right thing by putting money aside for their retirement.  

“The immediate effect is that it should increase the numbers of older people in work, especially in skilled areas where there are shortages such as doctors. Even better would be if people that had already paid this tax – in some cases tens of thousands of pounds – could now claim it back.

"However, it will not cushion the blow to those expecting rises in state pension age to 68 but who have not saved enough for their retirement.”

Corporation tax rise

The Government has also announced a rise in corporation tax, although only a small number of businesses will pay the 25 per cent rate - up from 19 per cent.

Meziane Lasfer, Professor in Finance at Bayes Business School, said:

“I think that this is going to motivate more companies to fund themselves with more debt to gain from tax shields.

"This view is also motivated by the decrease in the amount of capital gains and dividend that is tax free. From April, the threshold above which investors pay tax on capital gains will fall from £12,300 to £6,000 and then again to £3,000 in April 2024.

"The threshold for taxing dividend income will drop from £2,000 to £1,000 in April, and to £500 in April 2024. This will reduce the propensity of firms to finance with equity.”

Ends