UK Budget 2023: Chancellor Jeremy Hunt expands free childcare and scraps limit on tax-free pension savings
UK Budget 2023: Chancellor Jeremy Hunt expands free childcare and scraps limit on tax-free pension savings
Summary:
Chancellor Jeremy Hunt has delivered his Budget in the Commons, saying it will draw people back into the workforce
Labour's Keir Starmer responds by saying that the government is "out of touch" and putting the country "on a path of managed decline"
In a major move, Hunt is scrapping the lifetime allowance on tax-free pension contributions, which is currently £1.07m
Free childcare of 30 hours a week for working parents in England is being expanded to cover one and two-year-olds, but will only be fully implemented by September 2025
Fuel duty has been frozen for another year and government help with energy bills is being extended for another three months
Funding will be provided for up to 50,000 places on new voluntary employment scheme for disabled people, called Universal Support
Defence spending is being boosted by £11bn over the next five years and corporation tax will be increased from 19% to 25% as expected
The economy is forecast to grow by 1.8% in 2024 and 2.5% in 2025, while inflation is expected to fall to 2.9% by the end of this year
Free childcare will have the biggest impact on UK economy - OBR
We're still hearing from Richard Hughes of the Office for Budget Responsibility.The OBR reckons that the expansion of free childcare Jeremy Hunt has announced "has by far the largest impact on potential output in this Budget".
It calculates that the government plan to expand 30 hours of free childcare per week for youngsters aged between nine months and two years old will gradually add 60,000 people to the workforce.
In its report, the OBR believes that by 2027-28, these people will be working on average around 16 hours a week - so basically working part-time.
House prices to drop by 10% - OBR
More from the government's independent forecaster now on what impact today's budget is going to have on the UK economy in the coming years.
The Office for Budget Responsibility is predicting that house prices will fall by 10% from their high in the last three months of 2022.
And property transactions are expected to drop by 20% from their peak at the end of last year too.
It says indicators from Halifax and Nationwide suggest that house prices have already fallen by 3 to 6% between their peak in the middle of 2022 and February 2023.
The OBR thinks low consumer confidence, the squeeze on real incomes and the expectation of mortgage rate rises to come will contribute to house prices continuing to fall and fewer of them being bought and sold.
More from the government's independent forecaster now on what impact today's budget is going to have on the UK economy in the coming years.
The Office for Budget Responsibility is predicting that house prices will fall by 10% from their high in the last three months of 2022.
And property transactions are expected to drop by 20% from their peak at the end of last year too.
It says indicators from Halifax and Nationwide suggest that house prices have already fallen by 3 to 6% between their peak in the middle of 2022 and February 2023.
The OBR thinks low consumer confidence, the squeeze on real incomes and the expectation of mortgage rate rises to come will contribute to house prices continuing to fall and fewer of them being bought and sold.
'Children are not being put at the centre of this'
Vanessa Clarke
Education reporter
Gemma RolstoneCopyright: Gemma Rolstone
Gemma Rolstone from Puffins Childcare in Exeter, who runs five nurseries, says today’s announcement isn’t about early years education, it’s about childcare.
“The children are not being put at the centre of this” she explained.
She was hoping to see help with business rates and a much larger increase to the current funded rates.
“We need to get what we have at the moment right and also more investment in our staff, in recruitment and training. I was not expecting the expansion on funded hours, that is a curve ball."
She said it could end up being more expensive for parents and that she can’t believe there was no consultation about expanding free hours to under 3s.
Vanessa Clarke
Education reporter
Gemma RolstoneCopyright: Gemma Rolstone
Gemma Rolstone from Puffins Childcare in Exeter, who runs five nurseries, says today’s announcement isn’t about early years education, it’s about childcare.
“The children are not being put at the centre of this” she explained.
She was hoping to see help with business rates and a much larger increase to the current funded rates.
“We need to get what we have at the moment right and also more investment in our staff, in recruitment and training. I was not expecting the expansion on funded hours, that is a curve ball."
She said it could end up being more expensive for parents and that she can’t believe there was no consultation about expanding free hours to under 3s.
The word free is used and parents think the government is paying enough and they are not – and then we have to charge extra and it is seen as greedy and unfair.”
She will not be introducing the increased ratios and says a lot of her staff would leave the sector if she did.
“When you talk about a ratio of 1 to 5, you are talking about a ratio of 1 to 9 if a two-year-old’s nappy is being changed".
“The idea has come from Scotland where they have better paid staff and more qualified staff, you can’t cherry pick one part of the system and apply it somewhere else” she added.
She will not be introducing the increased ratios and says a lot of her staff would leave the sector if she did.
“When you talk about a ratio of 1 to 5, you are talking about a ratio of 1 to 9 if a two-year-old’s nappy is being changed".
“The idea has come from Scotland where they have better paid staff and more qualified staff, you can’t cherry pick one part of the system and apply it somewhere else” she added.
Childcare and pension changes will make very little difference - IFS
We've also been getting reaction to the budget from Paul Johnson, the director of the Institute for Fiscal Studies, who thinks the measures announced on childcare and pensions might not make that much difference.
Quote Message: The childcare package is expected to only get a few tens of thousands more mothers mostly back into work. We know a lot of people don’t even take up what they’re entitled to among the three and four-year-olds.The childcare package is expected to only get a few tens of thousands more mothers mostly back into work. We know a lot of people don’t even take up what they’re entitled to among the three and four-year-olds.
We've also been getting reaction to the budget from Paul Johnson, the director of the Institute for Fiscal Studies, who thinks the measures announced on childcare and pensions might not make that much difference.
Quote Message: The childcare package is expected to only get a few tens of thousands more mothers mostly back into work. We know a lot of people don’t even take up what they’re entitled to among the three and four-year-olds.The childcare package is expected to only get a few tens of thousands more mothers mostly back into work. We know a lot of people don’t even take up what they’re entitled to among the three and four-year-olds.
Quote Message: I think the changes to pension rules will make very little difference at all to the number of people in work. If you want to target something at doctors you need to sort out the NHS pension scheme."I think the changes to pension rules will make very little difference at all to the number of people in work. If you want to target something at doctors you need to sort out the NHS pension scheme."
He says it's not sensible to change the entire tax system in order to sort out a problem with how the way the NHS pension scheme works.
"That said there’s quite a lot to be said for giving people more flexibility to save for retirement but there’s all sorts of things that ought to have been done at the same time. There are some seriously excessively bits of support through the pension system that weren’t addressed."
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