Chancellor Jeremey Hunt has “room for manoeuvre” in March 15’s spring budget that could allow him to offer handouts to squeezed households and businesses, thanks to bumper tax receipts and warmer than anticipated weather this winter, analysts claim.
After the surprise £5.4bn surplus in January’s public spending, the Treasury could reverse the planned cut in energy bill support or implement tax changes to encourage people back into work or reform pension rules, said analyst Rob Morgan at Charles Stanley.
“In the absence of rabbits pulled from hats, investors will need to live with the changes unveiled at the Autumn Statement,” Morgan writes, but some changes could be made.
Short-term tax cuts are unlikely, given the need to stem inflation, according to Morgan, although by relaxing pension lifetime allowance rules Hunt could encourage workers to return, plugging the UK’s 1.16mln UK job vacancies, as per ONS data.
“This is currently frozen at £1.073m until 2026, but by increasing it some older people that are close to, or over, the limit could be encouraged back into work,” Morgan said.
Allowing people to make larger pension contributions could have a similar effect, he added, particularly by targeting people already having dipped into savings and are restricted to adding £4,000 a year as a result.
Aside from pension reforms, Morgan suggested Hunt may be “tempted” to extend government support on household energy bills, or even keep a cut on fuel duty in place.
Speculation has grown that the government could reverse its planned cut with energy bills support, due to see an 'average household' face price rises on April 1.