Major changes are expected this week when Jeremy Hunt announces his spring budget. The chancellor will reveal the budget on Wednesday, March 15 in what will be his first spring budget since he arrived in Number 11 Downing Street last October.
Mr Hunt became chancellor after ex-prime minister Liz Truss sacked his predecessor Kwasi Kwarteng following a disastrous mini-budget in September that saw the markets descend into panic. In his autumn statement, he scrapped much of what Mr Kwarteng had announced and laid out a five-year package of tax hikes and spending cuts, which he said would help steer the UK through a recession.
On Wednesday Mr Hunt will reveal the budget against a backdrop of still-rising energy prices and economic uncertainty. The Office for Budget Responsibility (OBR) will also publish its latest five-year forecasts for the economy and public finances on Wednesday.
Read more: The people on DWP benefits who will not receive £301 cost of living payment this spring
Here's what is likely to be high on the agenda for Mr Hunt in Wednesday's spring budget. To get all the latest money-saving news straight to your inbox sign up here.
Universal credit
Big changes are expected for universal credit claimants in Wednesday's budget. According to the Daily Express, the chancellor will make changes to encourage benefit claimants to move into work or increase their hours. Nothing has been confirmed, but this could include more regular meetings with work coaches or an expansion of skills bootcamps.
Mr Hunt reportedly wants to get hundreds of thousands more people into work, including early retirees and the long-term sick who don't work, and his budget is being billed as a 'back to work' budget. It has been suggested he will scrap the work capability assessment - used to decide whether or not a person is fit for work when it comes to universal credit - and replace it with an assessment that asks claimants what kind of jobs they think they could do. There may also be changes to make it more difficult to sign out of the labour force using a sicknote, or alterations to benefits so those who return to work can still receive some sickness benefits.
Major changes are also set for parents who are on universal credit. Mr Hunt is set to announce the government will start paying childcare costs on UC up front, rather than in arrears. Many parents on a low-income already find it hard to afford the up-front cost on childcare, and find it difficult to get into work as a result.
Energy prices
Under the government's current energy price guarantee (EPG), customers' typical bill is capped at £2,500. This cap is currently expected to rise to £3,000 from April 1, though there have been calls to keep the present cap to protect households from another crippling increase.
Reports suggest Mr Hunt will extend the £2,500 cap for another few months - though this has not been confirmed, the chancellor has confirmed the scheme was "under review."
Free childcare could be extended
Reports have also suggested Mr Hunt could change the eligibility for the 30 free hours of childcare the government currently offers. As it stands, all children aged three and four in the UK can claim up to 30 free hours of childcare a week but this could now also include children ages one and two.
Fuel duty cut extension
Mr Hunt is reportedly deciding whether to freeze fuel duty in the budget, rather than allowing it to rise by 12p per litre, as is currently the plans. If Mr Hunt were to raise fuel duty, it would be the first rise since 1 January 1, 2011, despite government policy being that the rate should rise with inflation. The chancellor is facing pressure to extend the 5p cut to fuel duty for another year, as fears grow that prices will be forced up again for drivers otherwise.
State pension age increase
Mr Hunt could also announce an increase to the state pension age. He has commissioned Mel Stride, the work and pensions secretary, to look into the impact of raising the pension age to 68 at a faster rate. Currently, the age at which people start receiving their state pension is 66, and is set to rise to 68 between 2044 and 2046. There is speculation this could be brought forward to the mid-2030s.
Tax free allowance on pensions
It has also been reported that the lifetime allowance (LTA) on tax-free pension savings will rise, as well as the £40,000 cap on annual pension contributions in a bid to tackle the “pension trap”, which has led many workers to take early retirement.
Other taxes
The Treasury received an unexpected windfall from record tax revenues in January, and Mr Hunt is now facing pressure to increase spending and cut taxes. A spending-heavy 'giveaway' budget is unlikely, but a 6% rise in corporation tax - from 19% to 25% - scheduled to come in from April may still be followed through on, having previously been announced by now-prime minister Rishi Sunak in his spring 2021 budget.
Military spending
Russia’s invasion of Ukraine has led to persistent calls for increased defence spending. In the Autumn Statement, the chancellor told MPs that both he and Rishi Sunak “recognise the need to increase defence spending”.
But there is likely disagreement between the Treasury and the Ministry of Defence over the size of any spending rise, with Ben Wallace understood to be demanding between £9bn and £11bn over the next two years just to put the defence budget back to where it was before inflation skyrocketed.
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