Following yesterday’s spring budget, the Chancellor laid out his plans for the economy. We examine the fall out from the announcements and the impact on households across the UK.
Yesterday, Jeremy Hunt revealed his Spring budget, and with it came a number of significant announcements. Firstly, it was announced that against all odds the UK would avoid a recession this year and that inflation will be down to just 2.9% by the end of 2023.
In terms of initiatives, the Chancellor announced that the Energy Price Guarantee would be extended until July 2023 but that the £400 energy support payments from the government to every household in the UK won’t be renewed.
Arguably the biggest headline from the budget was that free childcare is to be extended to every child over the age of nine months from September 2024. The government wants more people back in work and they hope that this new policy will result in young mothers returning to their careers.
On that theme, changes were also made to pensions to encourage people over the age of 50 to continue working rather than retire early. The amount a person can pay into their pension each year without a tax penalty is increasing from £40,000 to £60,000 and the pension lifetime allowance is to be abolished.
This allowance previously limited the amount of money a person could put away into their pension without paying tax.
The response to the budget
The budget has been received with a mixed response, depending on which side of the political fence you sit on. The childcare reforms have been generally welcomed by all, however, there are many who are disappointed by the length of time it will take to be rolled out.
It won’t be until September 2024 that parents will be able to receive free childcare for one and two-year-olds, and at that point, it will only be for 15 hours per week. It will take another 12 months until the full 30 hours each week can be claimed by parents across the United Kingdom.
This means that those who benefit fully from these reforms aren’t even pregnant yet, something which has raised eyebrows. Defending the length of time it will take for the reforms to come into play, Hunt said:
“It’s a huge change and we are going to need thousands more nurseries, thousands more schools offering provisions they don’t currently offer, thousands more childminders. We are going as fast as we can to get the supply in the market to expand.
“Women, in particular, have this cliff-edge when maternity leave ends after nine months and they have no help until the child turns three and that can be career-ending. I think it is the right thing to do for many women, to introduce these reforms and we are introducing them as quickly as we can because we want to remove those barriers to work.”
Some people on the left or also sceptical about the fact that the changes to childcare won’t come into play until after the next general election. This means that it will be up to the next government, which according to polls will be Labour, will be the ones responsible for paying for it.
Labour plan to reverse pensions cuts if they get into power
Perhaps the most polarising announcement to come from the budget was the abolishment of the pension lifetime allowance. Some critics are suggesting that it’s a policy that only benefits the top 1% of earners in the country.
Rachel Reeves, the Shadow Chancellor of the Exchequer said that she was “astonished” by the tax cuts. She added:
“This announcement comes at the same time as ordinary working people are facing the highest tax burden in 70 years and the biggest fall in living standards ever recorded in history. That is the wrong priority.
That’s why a Labour government will reverse this move. We urge the chancellor and the Conservative government to think again too.”
However, Senior Doctors have responded positively to the announcement. The Chancellor hoped that it would result in more doctors postponing their retirement and he may well be proven right. In a statement released by the British Medical Association, Senior Doctors said:
“Today’s announcement is an incredibly important step forward and the result of year after year of lobbying and campaigning for changes to pension taxation by the BMA.
‘The scrapping of the lifetime allowance will be potentially transformative for the NHS as senior doctors will no longer be forced to retire early and can continue to work within the NHS, providing vital patient care.”
Final thought
As with any budget, the opposition is to be expected. With a general election guaranteed to happen before the end of next year, this opposition is likely to be more fierce than ever. The thing that the government has on their side is the fact that this budget is undoubtedly more positive than the last one which will display to voters that they are slowly beginning to make things right.
Sir Kier Starmer, and the rest of the Labour Party, will be keen to ensure that voters don’t forget that it was the same party who put the country in the mess that they are now digging us out of.