Early evening summary
Jeremy Hunt has said he is “proving the doubters wrong” as he used a stronger than expected economic performance to help fund new tax breaks for business investment and a drive to get people back into the workforce. Here is our at a glance summary of what was in the budget.
Here is an analysis by the Guardian’s economics editor, Larry Elliott.
Here is an extract.
To be sure, the chancellor will be relieved that the independent Office for Budget Responsibility now thinks the economy will just about avoid the two consecutive quarters of falling output that would denote a technical recession, and that growth will be stronger in the likely pre-election year of 2024 than predicted last November at the time of his autumn statement.
But doing less badly is not the same as doing well. Hunt said he was delivering a ‘budget for growth’ – a refrain that has been heard many times by Conservative chancellors over the past 13 years. The reality is that the UK is battling against three powerful headwinds: rising interest rates, rising taxes and a cost of living crisis. It could certainly do without the added pressure of a credit crunch caused by bank failures. Despite the chancellor’s bullish performance, living standards are on course for their biggest two-year fall since the mid 1950s while taxes as a share of national income will be at their highest since the second world war by 2027-28.
And here are verdicts on the budget from a Guardian panel: Polly Toynbee, Miatta Fahnbulleh, Katy Balls, Frances Ryan, Louisa Britain, Rebecca Long-Bailey and Lucy Pasha-Robinson.
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Hunt's childcare plan includes 'one of most severe distortions' likely to be found in a tax and benefit system, says IFS
The Institute for Fiscal Studies says the childcare proposals announced today will create “one of the most severe distortions you are ever likely to see within a tax and benefit system”.
That is because the abrupt cut-off means that the generous provision being made available abruptly stops if someone starts earning more than £100,000. In a briefing, the IFS explains:
A parent with a one-year-old and a three-year-old whose childcare provider charges England’s average hourly rate for 40 hours per week would, after these reforms, find that their disposable income (ie earnings net of tax and childcare outgoings) falls by £14,500 if their pre-tax pay crosses £100,000. Disposable income would not recover its previous level until pre-tax pay reached £134,500, meaning a parent earning £130,000 would be worse off than one earning £99,000.
For those with higher childcare costs the distortions are even more absurd. A similar parent paying average London rates for childcare, using 50 hours per week, would see a £20,000 fall in disposable income when their pre-tax earnings cross £100,000. Disposable income would not recover its previous level until pre-tax pay reached £144,500.
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