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.
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.”
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.
FTSE drop worse than on ‘worst ever day’
A drop in the FTSE-100 of 3.7% marked a bigger decline than in the aftermath of September’s mini-budget, which one analyst described at the time as the “worst day ever seen in the markets”.
Insurance giant Prudential sank to the bottom of the index, with losses of more than 10%, while Barclays declined by about 8%.
Standard Chartered was also down by more than 6%, and HSBC slid by about 5%.
France’s biggest stock exchange also tumbled more than 3% and Germany’s by more than 2.5%, while markets in the US started trading firmly on the back foot.
The failure of Silicon Valley Bank (SVB) in the US over the weekend prompted fears about the health of the banking sector, and how far lenders could continue to withstand higher interest rates.
Issues in the US sparked fears of contagion over in the UK.
Chancellor ‘has head buried in sand’ over climate and energy
The Chancellor has been accused of keeping his head “buried in the sand” and committing public money to expensive solutions to the climate and energy crisis.
MPs, environmental and anti-fuel poverty groups have welcomed the renewed support for people’s energy bills but expressed frustration at an absence of new investment in clean energy and green jobs.
Bronwen Smith-Thomas, co-director at the Climate Coalition said: “The Chancellor has delivered a budget in the midst of an energy crisis while keeping his head buried in the sand.”
Mike Childs, head of policy at Friends of the Earth, said: “Backing expensive technologies like CCS (carbon capture and storage) and a new nuclear programme, while still blocking cheap onshore wind in England and failing to properly insulate the UK’s energy-leaking homes, will leave the UK hooked on high energy costs and falling behind in the global race to benefit from the transition to greener economies.”
Shadow climate secretary Ed Miliband said Labour wanted to create “over a million” jobs in green industries.
He added: “The British people should benefit from our natural resources but still the Conservatives won’t back Labour’s plan for Great British Energy - a new, homegrown, publicly-owned, clean energy company to lower household energy bills.”
Fast-track approval for new drugs
New drugs could get “near-automatic” sign-off for use in the UK under plans to enter new partnerships with other international drugs regulators.
Jeremy Hunt announced that £10 million is to be given to the UK regulator - the Medicines and Healthcare products Regulatory Agency (MHRA) - to help streamline approvals for new medical products.
Under the plans, drugs already approved by “trusted regulators” could be fast-tracked for UK use.
The first regulatory partners MHRA intends to build new “recognition routes” with are agencies in the USA and Japan, it said.
The MHRA said it will still be responsible for the approval of all “recognition route applications”.
The money will also be used to be used to develop a “thorough but shortened process to speed up the approval process for cutting-edge treatments developed in the UK”, the MHRA said.
Free childcare brings ‘freedom’ but fears over funding
One mother said the new 30 hours of free childcare for all under-fives would give her “freedom”, while others warned the policy would not help everyone and questioned if there were enough services to meet demand.
And campaigners fear the government has not pledged enough money to properly implement the new policy:
Free childcare plan a ‘big win’ for women but campaigners warn more money is needed
‘The new childcare announcement is freedom. That’s the only way I can describe it,’ one mother tells The Independent
Snap poll shows voters unsure about Budget
A snap YouGov poll has found more than half of Britons don’t know whether they support the measures or not.
Asked “from what you have seen or heard, do you support or oppose the measures in the Budget?” the poll found that only 4% strongly supported Jeremy Hunt’s announcement. A further 54%, by far the largest group, did not know either way.
Even among Conservative voters, only 7% strongly backed the measures, with 44% unsure.
Immigration forecast to outstrip earlier estimates
Projected immigration levels are set to increase to 245,000 a year, according to economic forecasts, despite Government promises to cut net migration.
The latest forecast from the Office for Budget Responsibility (OBR) puts net migration at 245,000 a year from 2026-27 onwards, revising up migration levels compared to a previous estimate of 205,000 in November.
The OBR cited figures from the Office for National Statistics (ONS) in making the determination.
Jeremy Hunt announced plans to add five construction occupations to the “shortage supply list” - the system that makes it easier for firms to hire some overseas workers.
The Government is also set to review that list, according to Budget documents, “so that the legal migration system is quicker and more responsive to the needs of businesses and the economy”.
Hunt found money for drivers but not nurses or doctors, says IFS chief
Jeremy Hunt’s decision to freeze fuel duty rather than funding a cost-of-living pay rise for nurses and other public-sector workers is a “political choice”, the Institute for Fiscal Studies (IFS) has said.
In his initial Budget analysis, IFS director Paul Johnson said the £6 billion the Chancellor committed to holding fuel duty for a 12th successive year could have paid for an inflation-matching offer for hundreds of thousands of striking workers.
“That’s a political choice. Money for motorists, but not for nurses, doctors and teachers,” he said.
Mr Johnson broadly welcomed the measures to boost employment, but warned that the impact on the numbers in work would be limited.
He said the pension tax changes were designed to encourage a relatively small number of better-off workers to stay in the workforce a bit longer and were “unlikely to have a big effect on overall employment”.
Meanwhile, the “likely doubling” of spending on childcare would potentially help “tens, but not hundreds, of thousands” of parents back into the labour market provided it was properly funded, he said.
Overall, he said households still faced an “enormously difficult” period ahead with a series of big personal tax rises due to kick in next month.
The freezing of income tax thresholds, announced by Mr Hunt in the autumn statement in November, will mean basic rate taxpayers will pay an extra £500 in 2023-24, while for higher rate taxpayers it will be an additional £1,000.
Tax projection calculator: How Budget will affect you
The Independent’s Budget calculator, created by tax advisory firm Blick Rothenberg, below will help you to determine whether you will be better or worse off:
Tax projection calculator: See how the Budget will affect you
Enter your details on our tax calculator to see whether you’re better or worse off following chancellor’s budget
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