Jeremy Hunt has delivered his first Budget as Chancellor to the House of Commons. Here is what was in it and what the headline announcements mean for UK households.
What were the headline announcements?
The Chancellor used his Budget to confirm free childcare support will be widened, extend household energy assistance and revamp the amount savers can have in their pensions before being taxed. There were also benefit changes to encourage those on long-term sick leave back to work and investment incentives for businesses.
What does the childcare support package entail?
As leaked on Tuesday, an expansion of free childcare for one and two-year-olds formed part of Mr Hunt's fiscal package. The plan included providing 30 hours a week of childcare for working parents in England with children in that age group, matching a similar offer already in place for those with children aged three and four.
The full offer of childcare support for all under fives will become available to those eligible by September 2025, the Chancellor said.
There was also increased funding announced for nurseries, with the money pot to increase to £288 million next year, up from £204 million in September.
Will the UK economy grow more after the Budget?
With £80 million of cash and tax breaks splashed on 12 investment zones, the removal of customs red tape and investment relief for businesses, the Chancellor will certainly hope so. To replace the Covid-era super-deduction policy that was due to wrap up, Mr Hunt announced a "full expensing" scheme for the next three years, with an intention to make it permanent.
The Chancellor said it would mean every single pound a company invests in IT equipment, plant or machinery will be able to be deducted in full and immediately from taxable profits, a move estimated to cost £9 billion a year. His confirmation that the corporation tax rise will go ahead as planned, rising from 19% to 25% next month, is unlikely to go down well with big business or the free marketeers on the Conservative backbenches.
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Did the Chancellor do anything to help with the cost of living?
As much as the Treasury chief wanted to focus on growth, sustained high energy bills meant further handouts were given as part of helping households and businesses deal with rising costs. Before he had stood up at the Commons despatch box, the Chancellor confirmed the UK Government's energy price guarantee, which caps average household bills at £2,500, will be extended at its current level from April to June. It had been due to rise by £500 to £3,000 next month.
After shocking reports of struggling bill-payers being forced onto more-expensive energy prepayment meters, the Chancellor has acted to end the metered "premium" from July. The Treasury expects it will save more than four million households £45 a year on their energy bills. Some £63 million of money was earmarked to help leisure centres with swimming pools meet energy costs and become more efficient following fears crippling heating costs could force some to close.
A 5p cut to fuel duty will continue for a further 12 months, with the Chancellor predicting a saving of £100 next year for motorists. There was good news for pub fans with an increase in the draught relief, a move the Treasury calculated will make alcohol duty 11p lower on pulled pints compared to supermarket sales. Tobacco duty will be uprated, however.
What incentives were announced to bolster the workforce?
Britain has lagged behind its G7 rivals in-terms of post-pandemic economic recovery, with the Chancellor revealing in January that the UK was being hampered by a 300,000 person gap in workforce numbers since before coronavirus. His Budget looked to offer incentives for people to return to work or take on more shifts, starting with pension reforms.
As widely reported, the Chancellor said the £40,000 cap on tax-free annual pensions contributions will rise to £60,000. The change will come alongside a decision to scrap the lifetime allowance (LTA) on pension savings, a fiscal policy previously labelled the "doctors' pension tax" by the British Medical Association.
It had been due to stand at £1.07 million until 2026, but Mr Hunt said removing the threshold would simplify the tax system and "incentivise our most experienced and productive workers to stay in work for longer".
Benefits were also revamped to encourage those on long-term sick into employment. The system used to assess eligibility for sickness benefits will be scrapped, while parents on universal credit will be paid childcare support upfront and the amount they can claim increased by several hundred pounds.
How could the Chancellor afford the handouts?
Mr Hunt had looked to downplay expectations ahead of his Budget, including suggesting extra childcare assistance would be "expensive to do". His pre-Budget day messaging followed on from a sober autumn statement, in which the Chancellor and Prime Minister Rishi Sunak preached fiscal responsibility in the aftermath of last year's mini-budget that sent the value of the pound tumbling during Liz Truss' brief premiership.
But Mr Hunt was handed some wriggle room in his calculations after the Office for Budget Responsibility (OBR) forecast higher growth than anticipated, with the UK avoiding a previously-forecast "technical recession". While the economy is due to contract by 0.2% this year, the OBR sees it increasing by 1.8% in 2024 and by more than 2% in at least the following two years. Those numbers paved the way for him to make the childcare pledge, an area that is likely to be a major battleground at the next election as Labour prepares to announce its own reforms.
