Spring Budget 2023 - FDF analysis

The FDF’s chief executive Karen Betts, in her response, highlighted the good news for the food and drink industry but also lamented the missed opportunity to make real progress on tackling labour shortages and the planned packaging reforms. You can also view the FDF’s full Budget submission.

A seed for future growth: The Prime Minister has made growth one of his five key promises to voters. A Conservative Prime Minister and Chancellor with a focus to deliver growth in their budget will have rung alarm bells for many following the disastrous mini-budget delivered by Kwasi Kwarteng which then led to a collapse in the bonds markets and sparked the end of Liz Truss’s premiership.

No style, some substance: The budget did deliver on some key asks for food and drink manufacturers, with specific wins on "full expensing", with companies able to deduct the total cost of investment in new machinery and technology to lower their taxable profits. This policy has been brought in for the next three years, with the intention to make this a permanent change, something the FDF has long called for. We also welcome the decision to extend the current Climate Change Agreements for two years - a measure we have been calling for consistently. This provides certainty for businesses as they invest in energy efficiencies, and time to design a smart replacement scheme.

The Chancellor launched the latest iteration of investment zones, which in this budget focuses on tax breaks and other benefits for 12 new Investment Zones across the UK, funded by £80m each over the next five years. These zones will be in the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be at least one in each of Scotland, Wales and Northern Ireland.

Labour's critique: Responding for the Labour Party, Sir Keir Starmer accused the Government of copying Labour policies to tackle the cost-of-living crisis, claiming that the Energy Price Guarantee were among Government policies that were originally Labour ideas. Starmer was most critical of Hunt’s changes to the Pension Tax Relief rules, labelling it as a tax cut for the richest 1%.
 
Starmer criticised the Government as ‘out of touch’ and described the budget as a ‘sticking plaster’ for the UK economy. Of note, he called for a renewed Industrial Strategy to remove barriers to investment. This is something the FDF have been pushing for, as we believe a new Industrial Strategy would create a consistency in policymaking. This was included in our recent Labour Party National Policy Forum consultation submissions.
 
Here is a more detailed overview of the budget below:

Labour market

• With 1.1 million vacancies in the UK, it was a ‘back to work’ focused Budget and yet there was very little substance on how we tackle skills shortages not only labour shortages. View a summary of the labour market measures. Some of the announcements included:
• Specific support for over 50s including ‘returnerships’ skills training to fast-track individuals with previous experience via accelerated apprenticeships and through skills bootcamps with a focus on construction and digital (a further 8,000 places per year between 2024-25). This is unlikely to make a huge difference to overall employment levels but we will work with the Department for Education to target some of these additional bootcamp places for key skills in our sector e.g. engineering and technician roles.
• A commitment to review the Shortage Occupation List (SOL) more regularly to respond more quickly to the needs of businesses and reconfirming the current review of the SOL that the Migration Advisory Committee (MAC) has recently opened. We will be in contact with members shortly to prepare our own response to the MAC.
• Expanded childcare support in England 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 stages from April 2024.  There were additional measures including wrap around childcare. We have welcomed this support which will hopefully help more women to return to the labour market.
• Occupational Health – The government will expand a subsidy pilot scheme to support SMEs in England with the cost of purchasing occupational health services. They also plan to consult on increasing occupational health provision by UK employers including regulatory and tax incentives options. We will review this with FDF’s Occupational Health and Safety Group in due course.
• Flexible Working – reconfirming its announcement at the end of the last year on the right to request flexible working from day one, there will be a call for evidence in summer 2023 to better understand more informal agreements on flexible working between employees and employers.

Regulation

• Climate Change Agreements will be extended for a further two years – a big win for the sector and something we have been calling for to provide certainty for businesses to invest in energy efficiency. This will now give us the time needed to properly consult on a future phase of the scheme that addresses both eligibility concerns and the need to incorporate decarbonisation targets.
• Simplified customs declarations – the ability to submit one supplementary declaration for goods imported over the course of a month along with increased time to submit the declaration is welcomed. We have long highlighted the duplication that exists between customs documents in our trade strategy and consultation responses so this announcement is a positive one but we will continue to urge government to further consider the duplicative element of other data requirements.
• Modernising Authorisations (Trusted Trader) – We also welcome the simplification of the current Trusted Trader programme, including the grouping of the 42 authorisations into 5 category groups, the ability to make a single application to access all the facilitations within the group and the ‘once is done’ approach to data collection. This could go further for example by allowing companies with accreditation assurance schemes in food and drink to be automatically granted approval for the authorisations.

Business investment and taxation

• Confirmation that the headline rate of Corporation Tax will increase from 19% to 25% from April 2023.
• Introduction of Full Expensing, a 100% First Year Capital Allowance, from 1 April 2023 for the next three years and a commitment to make it permanent when “fiscal conditions allow”. We called for full expensing in our Budget Submission and in our response to the HMT capital allowance consultation last year. This will allow businesses to deduct the cost of any investment in plant and machinery from their Corporation Tax bill – providing the cash flow benefit to the business in the first year of the investment.
• Following on from the changes announced in the Autumn Statement last year on SME R&D tax reliefs, the government has announced additional tax relief to help support R&D intensive SMEs.  We will continue to push for greater eligibility for the types of innovation our sector undertakes around reformulation. To find out more on R&D tax reliefs, watch back our Professional Affiliate webinar Optimising your cash position with R&D tax credits.
• 12 new Investment Zones across the UK (4 across Scotland, Wales and Northern Ireland).  In England, investment zones will have access to support worth £80 million over five years, including enhanced capital allowances, relief from business rates and employer national insurance contributions and grant funding. Locations in England include: East Midlands, Great Manchester, Liverpool, North East, South Yorkshire, Tees Valley, West Midlands and West Yorkshire and bids will be developed by the Mayoral Combined Authorities (MCAs) working in partnership with local universities, councils and businesses – and central government. FDF’s CEO Karen Betts recently met with Andy Burnham, Mayor of Greater Manchester, and we have plans to reach out to other MCAs so there could be some opportunities here for food and drink manufacturing to benefit from these investment zones

Business support

• The third round of Levelling Up Fund was announced and a new Levelling Up Partnership confirmed which will focus on targeting funding of £400 million to regenerate 20 local areas in England including City of Kingston upon Hull, Sandwell, Mansfield, Middlesbrough, Blackburn with Darwen, Hastings, Torbay, Tendring, Stoke-on-Trent, Boston, Redcar and Cleveland, Wakefield, Oldham, Rother, Torridge, Walsall, Doncaster, South Tyneside, Rochdale, and Bassetlaw. There could be opportunities for food and drink manufacturers located in these areas.
• Local Enterprise Partnerships (LEPs) will potentially have their government support withdrawn from April 2024 and their work will be transferred to local government. The Department for Levelling Up (DLUHC) and the Department for Business and Trade will consult on these proposals, before confirming a decision by the summer.  LEPs have been a mixed bag – some have prioritised food and drink and supported our sector well while others have struggled to deliver. Further changes to local government and potential funding streams could be unhelpful.