Shoosmiths’ experts react to Spring Statement

The chancellor, Jeremy Hunt, has today unveiled the contents of the Spring Statement, pledging to bring ‘long term sustainable growth’ to the UK.

Mr Hunt announced a raft of measures including a £27 billion tax cut for business, pension tax breaks, extra childcare provision and a temporary freeze on energy bills and fuel duty.

Our employment, tax, pensions, energy & infrastructure, regulatory and rail experts give their views on the plans, below.

Employment partner Charlie Rae expects that employers will broadly welcome the government’s intended aims of presenting a budget that encourages people back into the workforce.  He believes it will particularly interest many employers who are still struggling to fill vacancies or retain talent.  

Charlie said: “A number of the measures being introduced may help to ease the struggles many employers still face recruiting for vacancies or keeping their talent.  The announcement of free childcare of 30 hours a week for working parents being expanded to cover children from the age of nine months to two years old ought to mean working parents with young children will be able to re-enter the job market earlier or more readily, although less positive is that this won’t be fully implemented until September 2025 and some will question whether it is right to only apply it to households where both parents are working.  

Charlie added: “Equally, the government has also proposed changes that appear to be aimed at keeping older workers in the workplace longer, or possibly even encouraging them to return to the workplace after having retired.  This has been a recent theme of the government though it remains to be seen whether plans to increase the pensions annual tax-free allowance from £40,000 to £60,000 and to scrap the lifetime allowance on tax-free pension contributions, which is currently £1.07m, will have much of impact on this aim, given that it will be widely regarded as only really impacted those in highly paid roles.”

“The announcement that funding will be provided for up to 50,000 places on new voluntary employment scheme for disabled people, called Universal Support, is clearly aimed at helping to get disabled employees back into the workplace and this will be broadly welcomed.  However, being a voluntary scheme, with numbers that many will feel might not make enough of a difference, might limit its effectiveness”.

“Overall, the budget brings together a package of measures that is aimed at easing some of the workforce pressures still prevalent across many industries.   However, it is clearly going to take some time for the potential impact of many of the measures to be felt.  It will be interesting to see whether, in time, the measures will help employers and employees as much as the government intends” 

Dan Sharman, tax partner and head of employee incentives practices said: “We welcome announcements today around removing some of the technical requirements when granting EMI options (summarising share restrictions to option holders at the time of grant and ensuring option holders declare that they meet the working time requirements). 
“We often see these requirements being missed, e.g., when we review EMI options as part of a due diligence exercise, which can lead to the withdrawal of tax relief for option holders, often through no fault of their own. The EMI notification deadline is also being extended from April 2024, which will give companies longer to comply with the post-grant administrative requirements which again should lead to an increase in EMI options actually delivering the tax advantages to option holders, as intended.

“Also announced today is a call for evidence in relation to the non-discretionary incentive schemes (Share Incentive Plans (SIPs) and Save as You Earn (SAYE)) which will be used to consider opportunities to improve and simplify these schemes. In practice these schemes are expensive and administratively burdensome to administer and often only implemented by large companies, so this is a step in the right direction to open up these schemes to small and medium sized companies and in turn their employees.”

Suzanne Burrell, pensions partner, noted the surprise announcement to abolish the Lifetime Allowance (LTA)

Suzanne said: “Rumours in the run up to the budget had been that the Lifetime Allowance would be increased to £1.8m.  The chancellor has in fact announced its abolition, meaning that there is no longer a cap on the amount which workers can save into a pension without any upper tax limit.  The reduction in the Lifetime Allowance in recent years had caused unintended consequences, particular in the NHS.  The BMA had previously indicated that the previous freeze on the LTA would cause doctors and senior NHS staff to reduce hours or retire early, so this announcement will hopefully go some way to alleviating this.  

“The chancellor himself stated that "no one should be pushed out of the workforce for tax reasons".  Given the government's previous stated aim of encouraging people of pre-retirement age back into the workforce; this is one measure which may help with that goal.  What remains to be seen is how individuals who had already taken tax protections will be affected.  How will historic tax protections be unravelled?”

Meanwhile, Paul Carney, pensions partner, commented on the increase in the Annual Allowance (AA).

He said: “The AA was originally expressed as 100 percent of one’s earnings up to a maximum of £320k and represents the maximum amount that can be contributed by or on behalf of an individual to his or her pension plan before a penalty tax is applied (on the excess above the AA). The individual is charged at his or her marginal rate (for income tax purposes). The AA was reduced after 2010 to its current level; £40k.  The chancellor has announced that it will increase to £60k.”

“The increase in the AA will be welcomed by those wishing to save more for retirement because it increases the amount that can be contributed to a pension scheme or arrangement in a tax efficient manner.  On the other hand, commentators have been quick to point out (and this seems fair enough as observations go) that given the recent increases in interest rates and inflation (particularly increases in energy bills, food, and childcare costs), relatively few people have an “extra” £40k to contribute to a pension plan. It follows that increasing the limit to £60k is unlikely to make a material difference to the majority of the population.  

“That point having been made, our sense is that the increase will help senior employees who are members of public service pension schemes such as the NHS Pension Scheme, Teachers’ Pension Scheme and the (defined benefits sections of the) Principal Civil Service Pension Scheme. 

James Wood-Robertson, partner and head of energy and infrastructure, said: “We note the announcement on reclassification of nuclear energy as “environmentally sustainable” – clearly this depends on the proper and safe development of new nuclear and decommissioning of old nuclear and making a clear long-term plan for the industry, although this has definite potential for smaller, modular projects that can be delivered more quickly and efficiently.

“However, yet again, there is a disappointing absence of comments on core renewable energy development and energy storage, including green hydrogen, with the CCUS funding seeming to promote blue hydrogen.”

Angus Evers, regulatory partner, added: “Although the government would no doubt be reluctant to admit it, including nuclear energy in the UK’s green taxonomy is following the EU’s lead in including nuclear energy (and natural gas) in the EU’s own taxonomy. 

“Without that, investors and asset managers looking for ‘environmentally sustainable’ investments might have been drawn to new nuclear projects in the EU rather than in the UK.”

Michelle Craven-Faulkner, partner, and rail lead, said: “Surprisingly, there was no major direct mentions of rail in today’s statement, unless you include references to the extension to the City Region Sustainable Transport Settlements - worth £8.8bn over the next five years.

“We await further detail on whether, from a rail point of view, these settlements will be in addition to the Integrated Rail Plan settlement or form part of the same, particularly with regards to northern local authorities. There are other regions in the process of working towards devolution and so it will be interesting to understand how they will be able to access these settlements or whether at this stage it’s just open to those with existing devolution deals.

“With major rail related announcements potentially mooted before Easter, time is now ticking for the government to provide clarity over the future of the rail network. This includes the chosen location of Great British Railway’s HQ, Midland Main Line electrification and also the East Coast Main Line power upgrades.

“A statement is also needed confirming which elements of the Integrated Rail Plan will continue and when, alongside the long-awaited publication of the Rail network enhancements pipeline.”


This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024.


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