Budget 2023 – live updates: Pension lifetime allowance and childcare changes at a glance
OBR forecasts biggest fall in living standards on record as Labour’s Sir Keir Starmer accuses chancellor Jeremy Hunt of ‘permanent tax cut for wealthy’
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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.
‘Biggest change to our welfare system in a decade'
The chancellor announced the “biggest change to our welfare system in a decade”, with reforms aimed at supporting more disabled people into work.
Jeremy Hunt made a nod to reforms introduced by Sir Iain Duncan Smith when he was work and pensions secretary, telling the Commons: “The number of disabled people in work has risen by two million since 2013. But even after that we could fill half the vacancies in the economy with people who say they would like to work despite being inactive due to sickness or disability.
“With Zoom, Teams and new working models that make it easier to work from home this is more possible than ever before.”
“So for that reason, the ever-diligent Work and Pensions Secretary, today takes the next step in his ground-breaking work on tackling economic inactivity. I thank him for that, and today we publish a White Paper on disability benefits reform. It is the biggest change to our welfare system in a decade.
“His plans will abolish the Work Capability Assessment in Great Britain and separate benefit entitlement from an individual’s ability to work. As a result, disabled benefit claimants will always be able to seek work without fear of losing financial support.”
Chancellor jokes about his ‘new career in finance’ post-50
Talking about his new scheme to help over-50s back into work, the chancellor said he was “relegated to the backbenches” after he turned 50.
Deciding against leading a “quiet life,” he said he decided to embark on a “new career in finance” which was met by laughter in the benches.
“How’s it going?” could be heard amid the jeers, to which the chancellor heartily replied, “It’s going well.”
Hunt plans to abolish lifetime allowance limit on pensions
As the third part of his plans to get older people back into work, the chancellor announced plans to abolish the lifetime allowance limit on pensions.
Jeremy Hunt told the Commons: “Finally, I have listened to the concerns of many senior NHS clinicians who say unpredictable pension tax charges are making them leave the NHS just when they are needed most. The NHS is our biggest employer, and we will shortly publish the long-term workforce plan I promised in the Autumn Statement. But ahead of that I do not want any doctor to retire early because of the way pension taxes work.”
He added: “As Chancellor I have realised the issue goes wider than doctors. No one should be pushed out of the workforce for tax reasons. So today I will increase the pensions annual tax-free allowance by 50% from £40,000 to £60,000. Some have also asked me to increase the Lifetime Allowance from its £1 million limit. But I have decided not to do that.
“Instead I will go further and abolish the Lifetime Allowance altogether.”
Mr Hunt said the changes would “stop over 80% of NHS doctors from receiving a tax charge” and incentivise “our most experienced and productive workers to stay in work for longer”.
Hunt announces huge reform in childcare to help parents get back into work
The chancellor has confirmed a huge reform in childcare- but has said it will be implemented in stages.
The government will change minimum staff-to-child ratios from 1:4 to 1:5 for two-year-olds in England but make it “optional”, the chancellor said, as he announced an increase in funding for nurseries.
Jeremy Hunt said he wanted to reform the childcare system, warning: “We have one of the most expensive systems in the world. Almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.
“For many women, a career break becomes a career end. Our female participation rate is higher than average for OECD economies, but we trail top performers like Denmark and the Netherlands. If we matched Dutch levels of participation, there would be more than one million more women who want to work, in the labour force. And we can.”
On childminders, Mr Hunt said he wanted to address the 9% decline in one year in England, adding: “I have ... decided to address this by piloting incentive payments of £600 for childminders who sign up to the profession, rising to £1,200 for those who join through an agency.”
Government will increase funding paid to nurseries providing free childcare
Jeremy Hunt said the government will increase funding paid to nurseries providing free childcare under the hours offer by £204 million from this September and rising to £288 million next year.
He said: “This is an average of a 30% increase in the two-year-old rate this year, just as the sector has requested.”
Mr Hunt added: “We will change minimum staff-to-child ratios from 1:4 to 1:5 for two-year-olds in England as happens in Scotland, although the new ratios will remain optional with no obligation on either childminders or parents to adopt them.”
Mr Hunt said he also wants to help 700,000 parents on Universal Credit who had limited requirements to look for work.
He explained: “Many remain out of work because they cannot afford the upfront payment necessary to access subsidised childcare. So for any parents who are moving into work or want to increase their hours, we will pay their childcare costs upfront.
“And we will increase the maximum they can claim to £951 for one child and £1,630 for two children, an increase of almost 50%.”
Tories dressing up stagnation as stability, says Labour leader
The chancellor’s Budget was “dressing up stagnation as stability”, Labour leader Sir Keir Starmer said, claiming it put the country “on a path of managed decline”.
Working people who were earning less under the Tories deserved better than “cheap tricks from government of gimmicks”, Sir Keir went on, as he attacked Mr Hunt’s measures.
Opportunities had been missed for a proper windfall tax, and working people were being made to pay for Tory mistakes, he said, to cheers from his backbenchers.
Tax cut helps only richest 1% in society, says Sir Keir
Labour leader Keir Starmer said the one tax cut in the Budget, scrapping the pension lifetime allowance, helped the richest 1% in society.
Pointing out there was nothing extra for the NHS in the Budget, he said Britain could not afford the Tories.
And the Conservatives’ endless infighting on tax meant no progress, he said.
Hunt announces free childcare for under-fives
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Childminders to receive £600 ‘golden hellos'
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Government papering over the cracks, says shadow chancellor
Shadow chancellor Rachel Reeves said the Chancellor’s budget was “just papering over the cracks”.
“This Budget was a chance for Government to unlock Britain’s promise and potential,” she tweeted.
“But with growth downgraded, the hit to living standards the largest since records began, and a tax cut for the top 1% they are just papering over the cracks.
“Labour will build a better Britain.”
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