The Chancellor of the Exchequer presented his Spring Statement to Parliament on Wednesday 6th March 2024. This briefing provides details of the OBR forecast and an overview of key announcements relevant to the work of the Combined Authority.
Key announcements relevant to the work of the Combined Authority
Tees Valley Investment Zone
- The Tees Valley Investment Zone will focus on the digital and creative sectors, and local partners expect it to leverage £175 million in private investment and help to support over 2,000 jobs over the next ten years.
- The refocused Investment Zones programme, launched at Spring Budget 2023, gives areas a £160 million envelope to catalyse local growth and investment.
- The government will announce further details about the Tees Valley Investment Zone shortly.
Freeports
- Government confirmed the extension to Freeport tax reliefs to September 2031 that was announced at Autumn Statement 2023 will apply across English Freeport tax sites.
Long Term Plan for Towns
- Government announced £400 million of investment to extend the Long-Term Plan for Towns to a further twenty places across the UK, including £20m for Darlington.
National Overview
Economic Context and OBR Forecast
- The OBR forecasts the economy to grow by 0.8% in 2024, with growth then increasing to 1.9% and 2.0% in 2025 and 2026. Growth then returns towards the OBR’s estimate of its potential rate, averaging 1.8% in 2027 and 2028. GDP per capita is forecast to grow in every year from 2025.
- Inflation has fallen but – at 4.0% in January – it remains double the 2% target. The OBR forecasts inflation to fall to 2.0% in Q2 2024, around a year earlier than forecast in November 2023. Inflation is expected to fall below target and then gradually increase to settle at 2.0% in 2028.
- The unemployment rate is forecast to peak at 4.4% in 2024 and 2025, lower than the 4.6% in the OBR’s November 2023 forecast. The unemployment rate is then forecast to fall gradually to 4.1% in 2028.
Key Announcements
Boosting growth and investment
Investment Zones programme
- The refocused Investment Zones programme, launched at Spring Budget 2023, gives areas a £160 million envelope to catalyse local growth and investment.
- The Tees Valley Investment Zone will focus on the digital and creative sectors, and local partners expect it to leverage £175 million in private investment and help to support over 2,000 jobs over the next ten years. The government will announce further details about the Tees Valley Investment Zone shortly.
Freeports
- The government also confirmed the extension to Freeport tax reliefs to September 2031 that was announced at Autumn Statement 2023 will apply across English Freeport tax sites.
Investment Opportunity Fund
- The government has published the prospectus for the Investment Opportunity Fund. The prospectus sets out the details on how the fund will support investment into Freeports and Investment Zones across the UK.
Level 4 deeper devolution deals
- The government announced a new Level 4 “trailblazer” devolution deal with the North East Mayoral Combined Authority, which will provide a package of new funding potentially worth over £100 million, including a new Growth Zone.
- Other Level 4 deeper devolution deals recently announced include West Yorkshire, Liverpool City Region, and South Yorkshire Combined Authorities.
- Additional Level 4 powers have also been granted to the West Midlands Combined Authority.
Support for business
SMEs
VAT registration
- The government will increase the VAT registration threshold to £90,000 from 1 April 2024 and the deregistration threshold to £88,000 from 1 April 2024.
Growth Guarantee Scheme
- The government is extending the Recovery Loan Scheme to support SMEs to access finance – renaming it the ‘Growth Guarantee Scheme’. The government has published updated HMRC guidance on the tax deductibility of training costs for sole traders and the self-employed to provide certainty to those that want to invest in boosting their productivity.
Growth sectors
Creative Industries
The government announced the UK Independent Film Tax Credit. This includes introducing:
- a 40% relief from business rates for eligible film studios in England for the next 10 years;
- a new UK Independent Film Tax Credit; and
- increasing the rate of tax credit by 5% and removing the 80% cap for visual effects costs in the Audio-Visual Expenditure Credit.
A permanent extension will also be made to tax relief for theatres, orchestras, museums and galleries.
Green industries
- A further £120 million for the Green Industries Growth Accelerator (GIGA), to support expansion of low carbon manufacturing supply chains across the UK.
- Up to £390 million to support supply chains of offshore wind & electricity networks and the same amount for supply chains of Carbon Capture Utilisation and Storage (CCUS) and hydrogen.
Digital technology and AI
- A new £7.4 million upskilling fund pilot that will help SMEs develop AI skills of the future, unlocking the new opportunities that AI brings.
- This will complement the SME Digital Adoption Taskforce, which the government will shortly be launching. The taskforce will investigate how best to support the adoption of digital technology by SMEs to boost their productivity.
Life Sciences
- The government confirmed that competitions for large scale transformational investments will open for expressions of interest this summer with a separate competition for medium and smaller sized companies opening in the Autumn.
Apprenticeship Growth Sector Pilot
- £50 million Apprenticeship Growth Sector pilot, which will boost funding for eligible providers delivering 13 high-value apprenticeship standards in advanced manufacturing, green and life sciences sectors.
Public Sector Productivity Programme
- £4.2 billion of funding to improve the productivity of the public sector.
- This includes £3.4 billion of additional CDEL over three years from 2025-26 as part of the NHS’s productivity plan in England, investing in technological and digital transformation.
- the government is committing an additional £800 million of
- An additional £800 million of funding over the forecast period for productivity initiatives outside the NHS.
Back to Work Plan
- The government is extending the duration of the Additional Jobcentre Support pilot across England and Scotland for a further 12 months. This pilot will continue to test how intensive support at specific points in a Universal Credit claimant’s journey can help support them into employment or higher earnings.
Cutting taxes and supporting households
National Insurance
- National Insurance contributions (NICs): cut the main rate of Class 1 employee NICs from 10% to 8% from 6 April 2024.
- National Insurance contributions: cut the main rate of Class 4 self-employed NICs from 8% to 6% from 6 April 2024
High Income Child Benefit Charge (HICBC)
- The government plans to administer the HICBC on household basis rather than an individual basis by April 2026.
- Increase income threshold to £60,000 and taper range to £60,000 to £80,000 from 6 April 2024.
Debt Relief Order
- Removal of the £90 administration fee from 6 April 2024.
Air Passenger Duty (APD) rates
- The government is making a one-off adjustment to rates of Air Passenger Duty (APD) on non-economy passengers to account for high inflation in recent years and help to maintain the value of APD in real terms.
- For those in economy on domestic or short-haul flights, rates will remain frozen, benefitting more than 70% of passengers and keeping the cost of flying down.
Previously announced policies
Carbon Border Adjustment Mechanism
- A Carbon Border Adjustment Mechanism will be introduced from 1 January 2027 and will apply to relevant goods imported in the aluminium, cement, ceramics, fertiliser, glass, hydrogen and iron & steel sectors. The details will be subject to public consultation later in 2024.
Supporting documents
Spring Budget 2024 Speech
Spring Budget 2024 Document
Policy Paper on Investment Zones
Policy Paper on Investment Opportunity Fund: prospectus
Policy Paper on the UK Independent Film Tax Credit