Spring Budget summary: free childcare expansion, lifetime allowance abolished
Source - Daily Telegraph 15/03/23
The UK economy
Announcing the latest predictions by the OBR, Mr Hunt said improving global conditions and actions taken by ministers after Liz Truss's disastrous mini-Budget meant the UK is now expected to avoid an economic recession.
He said that GDP is now expected to contract by just 0.2pc in 2023, down from a gloomier prediction of 1.4pc in November.
After that, the economy is expected to grow every year to 2027, including: 1.8pc in 2024; 2.5pc in 2025; 2.1pc in 2026; and 1.9pc in 2027.
Unemployment is also not expected to rise by more than one percentage point, while record inflation is expected to come down dramatically.
Mr Hunt said the OBR now forecasts it will fall from 10.7pc at the end of 2022 to 2.9pc by the end of 2023.
This means the Government will meet Rishi Sunak's target for reducing inflation, he said.
Energy bills support
The Government’s Energy Price Guarantee, which subsidies household energy costs above a certain threshold, was previously scheduled to become less generous from April 1.
This would have seen the amount that a typical household pays per year rise from £2,500 to £3,000.
But Mr Hunt confirmed that support will now continue at the same level. It will save the average family £160 on their energy bills and cost the Treasury around £3bn.
He also confirmed that the so-called "prepayment premium" – where customers who use energy prepayment metres pay more than those on direct debit – would be scrapped from July.
The move is expected to save about four million households £45 a year.
Pension lifetime allowance abolished
In an eye-catching bid to lure over-50s who took early retirement back to work, the Chancellor unveiled generous pension tax changes.
He surprised MPs by abolishing the lifetime allowance – the maximum amount that workers can put into their pension pots before they are taxed – instead of simply raising the threshold, as had been predicted.
The lifetime allowance is currently just over £1m.
In a nod to concerns that pension taxes have prompted many clinicians to quit early, Mr Hunt said the change meant 80pc of NHS doctors would no longer pay taxes on their pensions.
“No one should be pushed out of the workforce for tax reasons,” the Chancellor said.
Childcare
Costly childcare has become a major burden on parents and experts have long claimed it is one of the most important issues that the Government needs to tackle.
So Mr Hunt said current free childcare provision will be expanded and extended to children aged as young as nine months, or when a mother’s maternity leave ends.
Under the current system, some eligible working parents with three-to-four-year-olds can claim up to 30 hours of free childcare per week for 38 weeks of the year (during school term time) with all entitled to at least 15 hours per week.
But Mr Hunt said all parents who work at least 16 hours per week will soon be able to claim 30 hours of childcare, for children aged between nine months and four.
It will be introduced in stages. From April 2024, parents of two-year-olds will be able to claim 15 hours per week.
Then in September 2024, parents of children from nine months old will be able to access the same childcare, with all children covered by the policy qualifying for 30 hours a week from September 2025.
The package is worth £6.5bn overall, Mr Hunt said.
He added: “I don’t want any parent with a child under five to be prevented from working if they want to.”
Meanwhile, parents who claim universal credit will no longer have to claim back childcare costs, receiving the money up front instead.
Corporation tax rise
Despite warnings from a chorus of business leaders that higher taxes will hamper growth, Mr Hunt confirmed he is pressing ahead with a rise in corporation tax effect from April.
The change, first announced by then-chancellor Rishi Sunak in the 2021 Spring Budget, will see the tax rate climb from 19pc to 25pc. This is expected to pull in an extra £18bn per year for the Treasury.
The full force of the tax rise will hit businesses with profits of more than £250,000, while those with profits of between £50,000 and £250,000 get marginal relief.
Those with profits of less than £50,000 will see no change – they will continue to pay corporation tax at 19pc.
Mr Hunt claims says just one in ten companies will pay the full 25pc rate.
Fuel duty
As trailed in advance, a planned rise in fuel duty this April has been delayed again.
Hiking the levy in line with RPI inflation would have added 7p to the price of a litre of fuel, while a temporary 5p fuel duty cut was also due to expire.
The two factors combined meant the cost of fuel duty was on course to rise by 23pc – an extra 12p per litre.
However, Mr Hunt confirmed that the temporary cut would be extended by 12 months and the inflationary rise held back again.
These two measures combined would cost the Treasury £6bn, Deutsche Bank has predicted.
Investment zones
The Government will create 12 new "investment zones" across the UK.
Mr Hunt said ministers hoped to create "12 new Canary Wharfs".
These will be in the West Midlands, Greater Manchester, the Northeast, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool, as well as at least one each in Scotland, Wales and Northern Ireland.
They will be led by partnerships between local authorities, universities and businesses, aiming to galvanise innovation.
Defence budget up
Mr Hunt said the UK's defence budget will rise by £11bn over the next five years.
He said the Government will also aim to increase defence spending to 2.5pc of GDP, up from the Nato minimum of 2pc, when economic and fiscal circumstances allow.
A funding boost will also be handed to the Office of Veteran Affairs.
New nuclear power body
Mr Hunt announced the launch of Great British Nuclear, a new body that will help energy companies find suitable sites for nuclear power plants and develop crucial supply chains.
He said GBN would be tasked with ensuring 25pc of Britain's electricity comes from nuclear by 2050, as set out in last year's energy security strategy.
Meanwhile, the Government is to launch an open competition for small modular reactors (SMRs), where companies such as Rolls-Royce can put forward their technology as candidates to receive funding. It will finish by the end of the year.
Mr Hunt also confirmed nuclear power will be classed as "environmentally sustainable" to drive investment, a key ask of companies such as EDF which are trying to attract private investment into proposed sites including Sizewell C.
Prizes for AI researchers
In a bid to make the UK a leader in artificial intelligence (AI), Mr Hunt announced plans to boost the country's computing power and encourage innovation.
The Chancellor has accepted recommendations from Sir Patrick Vallance, the chief scientific adviser, including a proposal to provide £900m towards developing a new cutting-edge super computer for the UK.
The Government will iron out issues around AI with the Intellectual Property Office and launch a new "AI sandbox" to to help companies bring products to market more quickly.
It has also published a new strategy to make the UK a leader in quantum computing which will see £2.5bn ploughed into research up to 2033.
Meanwhile, Mr Hunt has created a new annual prize of £1m, which will be awarded every year - for the next 10 years - to AI researchers for the best innovations.
Brexit Beer boost
The duty charged on draught pints is to be frozen to help "the great British pub", the Chancellor announced. Mr Hunt said the change would not have been possible when Britain was in the European Union. It will also apply in Northern Ireland.
However, drinkers will see tax on other alcoholic drinks soar by 10.1pc in August, in line with inflation after a previous freeze.
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