Budget 2023: Pension lifetime allowance cap abolished
Jeremy Hunt has promised a major expansion in state-funded childcare and tax breaks for businesses in Budget measures aimed at boosting economic growth.
The Chancellor said a recession would be avoided and inflation would fall dramatically as the economy was “proving the doubters wrong” in his statement to the Commons on Wednesday.
In an effort to remove barriers to work, he promised up to 30 hours a week of free childcare for eligible households in England with children as young as nine months.
Mr Hunt resisted demands from Tory MPs to scrap April’s increase in corporation tax from 19% to 25%, but he instead promised a set of reliefs to help firms reduce their bills.
And as part of a package aimed at helping with the cost of living, the Chancellor said the energy price guarantee will be extended at its current level from April to June.
However, fiscal watchdog the Office for Budget Responsibility forecast the biggest fall in living standards on record.
The OBR upgraded its growth forecast for 2024 from 1.3% to 1.8%, but downgraded predictions for the following years to 2.5% in 2025, 2.1% in 2026 and 1.9% in 2027.
Budget at a glance
- Inflation is expected to fall to 2.9% by the end of the year
- Lifetime allowance limit on pensions axed and pensions annual tax-free allowance rises to £60,000
- Incentive payments of £600 for childminders joining the profession will be tried out
- Minimum staff-to-child ratio will change from 1:4 to 1:5 for two-year-olds in England
- 30 hours of free childcare for all under-fives
- Plan for schools to offer wrap-around care either side of the school day by September 2026
- Energy price guarantee will be extended for three months
- Welfare reforms will be designed to support more disabled people into work
- Sanctions reforms will be aimed at getting people on Universal Credit benefits into work
- Another £11 billion will be added to the defence budget over five years
- 12 new investment zones and at least one in each of Scotland, Wales and Northern Ireland
- Up to £20bn will be allocated for carbon capture and storage
- Nuclear power will qualify for the same investment incentives as renewable energy
- The Chancellor announced an annual £1 million prize for AI research over the next 10 years, called the “Manchester Prize”
- Tax on draught products in pubs will be up to 11p lower than in supermarkets
Sam Rkaina15 March 2023 15:59
London stock market suffers heavy losses as banking crisis fears intensify
Fears that the economy might be on the edge of another “2008-style crisis” caused shares in top European banks to plunge and dragged London’s FTSE-100 down to its lowest level this year.
Troubled bank Credit Suisse saw its share price drop by as much as a quarter to a new record low, causing its shares to be temporarily suspended on the Swiss market.
Investors were shaken by the collapse of Silicon Valley Bank (SVB) in the US over the weekend, sparking concerns about the viability of the “too big to fail” Credit Suisse.
“If the bank fails, this could have major implications for other European banks that have exposure to the beleaguered Swiss lender”, said Fawad Razaqzada, a market analyst for City Index and Forex.
“Concerns over another 2008-style financial crisis have intensified,” he warned.
London’s top tier index declined by than 3.7% amid the nerves among investors. It fell to lows of around 7,350, not seen since December last year.
Jane Dalton15 March 2023 17:01
Mixed response on tax relief in arts sector
The Chancellor’s decision to maintain rates of theatre and orchestra tax relief at their current levels has been “unequivocally welcomed” by some parts of the sector, while others have called for a “total reset of arts policy”.
Jeremy Hunt announced that the higher rates of 45% and 50% respectively will be extended for a further two years from April.
Sir Howard Panter and Dame Rosemary Squire, joint chief executives of Trafalgar Entertainment, one of the biggest theatre companies in the UK, said they “unequivocally welcomed” the decision.
The Musicians’ Union (MU), which lobbied for the rates extension, also welcomed the announcement as a “vital lifeline”.
However, Paul W Fleming, general secretary of actors’ union Equity, was more critical and called for a “total reset of arts policy”, saying: “The reality is his Government has presided over a precipitous decline in arts funding, culminating in the closure of Oldham Coliseum and potential job losses at the English National Opera.
“We need a total reset of arts policy, based on investment and good jobs – decent culture for all, not constant culture war.”
Jane Dalton15 March 2023 16:47
What benefits reforms mean for sick, jobseekers and parents on welfare
The chancellor announced the system used to assess eligibility for sickness benefits will be scrapped, while parents on universal credit will be paid childcare support upfront, and there will be reforms to jobseekers on universal credit:
Jane Dalton15 March 2023 16:37
Watchdog forecasts biggest fall in living standards on record
The UK economy is set to avoid a recession but people are still expected to face the biggest fall in living standards on record, according to the fiscal watchdog.
The Office for Budget Responsibility (OBR) projected that the economy would shrink by less than expected and inflation will fall more sharply than previous forecasts, in an improved economic outlook in the near term.
Declining wholesale energy prices and cooling global inflation have improved the position of the Treasury compared with the last budget statement in November.
Previously, the OBR said the UK was due to enter a recession in 2022 and shrink by 1.4% in 2023.
However, the fresh projections show that the economy is set to avoid a technical recession – which means two consecutive quarters of decline – and shrink by 0.2% this year as whole.
Jane Dalton15 March 2023 16:17
GDP forecast to grow
Gross domestic product (GDP) is forecast to start growing next year but underlying debt is also forecast to rise by comparison for up to four years.
It is predicted to be 92.4% of GDP next year, 93.7% in 2024-25; 94.6% in 2025-26, and 94.8% in 2026-27, before falling to 94.6% in 2027-28.
The deficit falls from 5.1% of GDP in 2023-24, to 3.2% in 2024-25, 2.8% in 2025-26, 2.2% in 2026-27 and 1.7% in 2027-28.
Jane Dalton15 March 2023 16:10
House prices to fall 10%, say forecasters
The OBR has predicted that house prices will fall by 10 per cent from their high in the last three months of 2022 – a 1 per cent point larger fall than in the November forecast.
And the number of property transactions is expected to drop by 20 per cent from its peak at the end of last year.
The OBR said low consumer confidence, the squeeze on real incomes and the expectation of mortgage rate rises to come are set to lead to house prices continuing to fall.
Jane Dalton15 March 2023 15:50
Most householders eligible for extended energy bill support
The cancellation of the energy price hike announced in the Budget does not apply to those on a fixed-term energy deal, so some customers will be locked in at higher prices than the current cap.
Similarly, some standard variable green energy tariffs have been exempted from the cap by Ofgem.
But the vast majority of customers are eligible, including those on pre-payment meters:
Jane Dalton15 March 2023 15:35
Nuclear energy reclassed as ‘environmentally sustainable’
Nuclear energy is to be reclassified as “environmentally sustainable” to give it the same access to investment incentives as renewables, the Chancellor has said.
In his spring Budget, Jeremy Hunt said the Government will launch a Great British Nuclear scheme to “bring down costs” and “provide opportunities” in the supply chain with a view to nuclear power providing a quarter of the UK’s electricity generation by 2050.
He also launched a competition for small modular reactors (SMRs), which will be funded if the technology is proven to be viable.
Mr Hunt also said that he wanted to invest up to £20bn to help develop carbon capture usage and storage (CCUS) technologies, designed to suck up carbon emissions from major polluting industries.
However, none of the new money for CCUS that Mr Hunt has promised will come before the next election.
The Chancellor set out what he called the four Es – enterprise, education, employment and everywhere – as priorities.
Caroline Lucas, Green Party MP, said he had “utterly failed” to mention a fifth – environment.
She said: “Just when we needed a solar rooftop revolution, an unblocking and upscaling of renewables, a major street-by-street mass insulation programme, and a commitment to invest in our totally neglected, sewage-filled rivers and seas, we get too slow, too expensive and too dangerous nuclear white elephants.”
Jane Dalton15 March 2023 15:13
Pensions changes permanent tax cut for wealthy, says Labour leader
Labour leader Sir Keir Starmer described the generous tax-free pensions allowances in the Budget as a “permanent tax cut” for the wealthy.
Sir Keir told the Commons: “We needed a fix for doctors, but the announcement today is a huge giveaway to some of the very wealthiest.
“The only permanent tax cut in the Budget is for the richest 1%. How can that possibly be a priority for this Government?
“The truth is our labour market is the cast-iron example of an economy with weak foundations. Our crisis in participation simply hasn’t happened elsewhere, not to this extent; it is a feature of Tory Britain and global excuses simply won’t wash.”
Jane Dalton15 March 2023 15:08