Highlights from the Chancellor include pension changes benefiting the NHS, investment zones support in a handful of regions, and extended assistance for household energy bills. Businesses received limited aid, progress on devolution remains narrow, and the Budget scarcely addressed transport and infrastructure. Our public sector advisory teams delve into these Budget implications in detail.
The abolishment of the lifetime pensions allowance should have a significant impact on the NHS. The Chancellor made this change primarily to stop doctors leaving the NHS once they have reached the lifetime allowance. With a vacancy rate of 6% (NHS Vacancy Statistics) for doctors, there is a real need to keep doctors working in the NHS well beyond their early 50s when many of them have reached the cap resulting in them either reducing their working hours or retiring altogether from the NHS. This change, coupled with the increase in the annual pension tax free allowance, should go some way to keeping people in the service for longer. Furthermore, the new rules should support elective recovery, as many consultants opted not to do additional sessions under the old rules, due to the risk of breaching the pension allowances.
Other benefits to the NHS will come from the Chancellor’s wider proposals. Support for disabled people to work from home may benefit gaps in administration and clerical roles; extending free childcare to children from nine months old and extending after-hours care at schools with childcare may support NHS staff back into work. However, there was no update on deep-rooted NHS workforce issues, although the Chancellor did confirm the NHS long-term workforce plan would be published “shortly”. The Government has also made a 5% offer to nursing and ambulance unions to try and end industrial action.
Deregulation of the Medicines and Healthcare Products Regulatory Agency (MHRA) was billed as allowing NHS patients the earliest access to new drugs. However, there was no information on how the NHS will fund new drugs, which may lead to controversies about late adoption and unequal access.
There were no announcements in relation to new capital for the NHS, but following a question in the Commons, the Prime Minister confirmed the government’s commitment to the New Hospital Programme. This is undoubtedly positive given the serious need for investment in new buildings, but what is still not clear is when the process will resume for those trusts selected for the programme which have paused their schemes for over two years.
Our understanding is that next year’s financial position looks challenging and that most NHS systems are now needing to deliver historically high levels of cost efficiency in order to remain within fiscal limits.
Despite recent uncertainty about their future, the Chancellor has announced the intention to deliver up to 12 new investment zones. Eight locations in England have been chosen to host them, with the government to agree plans with local partners by the end of the year.
The Department for Levelling Up, Housing and Communities (DLUHC) is working closely with the devolved administrations to establish how investment zones in Scotland, Wales and Northern Ireland will be delivered.
Each English investment zone will have access to interventions worth £80 million over five years, with an indicative split of £35 million of grant funding and £45 million of tax incentives, available in up to 600 hectares across up to three sites, consisting of enhanced rates of Capital Allowance, Structures and Buildings Allowance, and relief from Stamp Duty Land Tax, Business Rates and Employer National Insurance Contributions.
Plans will need to be developed collaboratively by Mayoral Combined Authorities (MCAs) – working in partnership with local universities, councils and businesses to identify the appropriate interventions that will maximise the benefits of both public and private sector investment.
Although it is good to finally have some clarity on the future of investment zones, given the geographical limitations to the available tax incentives, it is hard to see how they will have a major impact on delivering the Government's levelling up agenda and supporting wider economic growth.
For energy, it will be a relief to many that the government's support for household energy bills (the Energy Price Guarantee (EPG) has been held at £2500 for three more months – offsetting a £500 per average home hit that was due from April. But there were no new announcements for business energy bill payers. The hope is that by then, the separate price cap (managed by the regulator, Ofgem) will be reduced below this level for many.
A number of campaigns have been successful. The EPG extension was a campaign led by Martin Lewis, financial journalist, and a separate campaign to limit the price of pre-payment meters to that of direct debit tariffs was also successful. The detail of the latter will be important (as such customers cost suppliers more to service so suppliers will need to be subsidised to make this change, or risk pushing down on their thin margins).
It was thin pickings for businesses seeking help with energy bills. Government has already scaled back support from the blanket subsidy which will end in a few weeks, and only a limited number of companies will benefit from extension of the Climate Change Agreement scheme.
£20 billion funding for carbon capture and a new competition for mini nuclear reactors included limited detail on the amounts or structure of this support (with the £20 billion figure spread over at least 20 years). Absent from the announcement was any news on support for hydrogen (of any hue). This was expected and could be being saved for an “energy moment” later this month, or as Government would like to call it – a “Green Day”. A shortlist of projects for the first phase of CCS deployment is also likely to be announced then – the new net zero department has been reviewing applications for this process for some months.
A minor nuance is also detailed in the Treasury papers – the new Great British Nuclear policy will focus on smaller modular reactors (being developed by Rolls Royce and others), but there is very little on further gigawatt scale projects – beyond Hinkley Point C and Sizewell C, both under development by French government owned EDF and supported financially by HMT. A £700 million funding package was announced for these reactors in the last fiscal event of 2022. Small modular reactors (SMRs) may deliver growth and export benefits to the UK economy – but they will not move the dial on the countries 2050 net zero target.
The Spring Budget continues to put devolution in the spotlight, with trailblazer deals for Greater Manchester and West Midlands Combined Authorities set to drive local growth and reduce regional inequalities. These “deeper deals” offer local leaders more authority and autonomy in areas such as transport, housing, employment, and net-zero initiatives, setting a blueprint for future negotiations.
Greater financial independence for the trailblazers has also been announced through single multi-year funding settlements, empowering local leaders to address longer-term challenges and capitalise on opportunities for sustainable growth. However, with increased power comes the need for transparency, capacity, and clear KPIs to ensure promises are delivered.
Despite devolution progress in select regions, the focus remains narrow, and uncertainty lingers for the rest of the country. The Spring Budget allocates less than £1 billion for levelling up, raising concerns about the amount of of funding available for meaningful change. While some enjoy a long-term commitment to retaining 100% of their business rates, the public sector's financial sustainability remains uncertain, and key issues such as local government funding have been delayed.
As the devolution agenda advances, local leaders must ensure accountability and effective use of resources, while the Government must provide clarity and support for broader regional development.
From a transport perspective, the Budget was notably quiet, with the exception of a welcomed additional £200 million to repair potholes on the road network and a continuation of the five pence off fuel duty. It was also good to see an increased focus on devolution, with funding for investment zones and the second round of the City Region Sustainable Transport Settlements. There was a further nod to localizing economic management which may also prompt investment in local transport.
However, given the focus on levelling up and the drive towards net zero, it could have been a missed opportunity to provide further investment in the public transport network. For example, having previously announced a welcome extension of the £2 cap on bus fares and support to the bus network until June 2023, this may yet not prove to be sufficient to enable the recovery of the sector. With HS2 and rail reform recently in the press, it would have been helpful to hear more on those areas.
