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Budget 2023 Live: Jeremy Hunt Announces Reforms To Childcare, Pensions And Disability Benefits

Hunt says free childcare offer from age of nine months will cut childcare costs for families by nearly 60%Hunt ends with a final childcare announcement.

He says the government will offer 30 hours of free childcare for every child from the age of nine months, where all adults in the household work.

He says this will reduce childcare costs for families by nearly 60%.

Key events

OBR says real disposable income falling by 5.7% over 2 years – less than expected last autumn, but still biggest drop on recordAccording to the Office for Budget Responsibility, household disposable income is set to fall by almost 6% in the two years between 2022 and 2024. The OBR says this is an improvement on what it was expecting last autumn, it is still the steepest fall since records began more than 60 years ago. The OBR says:

Real household disposable income (RHDI) per person – a measure of real living standards – is expected to fall by a cumulative 5.7 per cent over the two financial years 2022-23 and 2023-24. While this is 1.4 percentage points less than forecast in November, it would still be the largest two-year fall since records began in 1956-57. The fall in RHDI per person mainly reflects the rise in the price of energy and other tradeable goods of which the UK is a net importer, resulting in inflation being above nominal wage growth. This means that real living standards are still 0.4 per cent lower than their pre-pandemic levels in 2027-28.

Disposable income Photograph: OBRThe sharp rise in interest rates over the last year means the cost of servicing the UK’s national debt has also surged.

Interest rate have tripled over the past year across advanced economies.

The OBR forecasts that the share of revenues consumed by UK debt servicing will rise from 3.1% in 2020-21 to 6.2% in 2021-22, and hit 7.8% by 2027-28.

That is because much UK government debt is index-linked, meaning that the interest payments received by bond-holders goes up and down in line with inflation (which hit 40-year highs, over 10%, last year).

Here are three takes on the budget from Paul Johnson, director of the Institute for Fiscal Studies.

Extending free childcare to all children over 9 months really is a big extension of the welfare state. Prob. about doubles childcare spending. We’ve been edging in this direction for a good 20 years. This is a new leg of the welfare state finally nearing its end point.

— Paul Johnson (@PJTheEconomist) March 15, 2023Note what the Chancellor did not mention. Nothing on public sector pay. No mitigation of big income tax rises coming in this April. No more money for public services post 2024.

— Paul Johnson (@PJTheEconomist) March 15, 2023OBR may be more positive about inflation and the economy. But it is still projecting that 2022 and 2023 will see the biggest ever fall in living standards.

— Paul Johnson (@PJTheEconomist) March 15, 2023And, of course, the most interesting material is often in the Office for Budget Responsibility’s report, its economic and fiscal outlook. That’s here.

UK on track to hit debt target ‘by narrowest of margins’The UK is on track to hit the government’s target to have debt falling as a share of the economy by “the narrowest of margins in five years’ time”, the Office for Budget Responsibility said.

The OBR’s economic and fiscal outlook shows that the chancellor only has £6.5bn of headroom to achieve the target to have debt falling, as a share of GDP, in the 2027-28 financial year.

That is the smallest amount of headroom any chancellor has set aside against his primary fiscal target since the OBR was established in 2010 by George Osborne.

And that calculation assumes that the government raises fuel duty rates in future years (having frozen fuel duty at its current rate for another year today).

Photograph: OBRThe OBR says:

Underlying debt – which excludes the Bank of England and is the measure targeted by the chancellor – does not peak until 2026-27 (a year later than we forecast in November) at 94.8 per cent of GDP and then falls only marginally (by 0.2 per cent of GDP) in the final year of the forecast.

That suggests Hunt may not have much more firepower for pre-election giveaways at future budgets, as he has spent around two-thirds of the improvement in today’s forecasts.

The Treasury has now published all the budget documents on its website here. The most important one is the red book, but the policy costings and distributional impact analysis is on the website, too.

And here is the Treasury’s news release with its summary of the measures.

Starmer ends his response by saying this is just sticking plaster politics. After 13 years of no growth, people are entitled to ask if they are better off than they were before. The answer is no, he says.

Starmer says only permanent tax cut in budget ‘is for richest 1%’Starmer says the government was right to look at a solution to the pensions problem that means some well-paid doctors are retiring early.

But he says the pensions tax allowance announcement is “a huge giveaway” to some of the wealthiest people in the country. He goes on:

The only permanent tax cut in the budget is for the richest 1% How could that possibly be a priority?

Starmer accuses Hunt of lifting ideas from Labour.

He says of course Labour welcomes more spending on childcare.

As Tory MPs jeer, he tells them they were not listening when Hunt explained how long it would take to implement.

Starmer makes a joke about the petrol station photocall that Rishi Sunak staged when he was chancellor, telling Jeremy Hunt that he should use his own car – and know how to use a debit card – when he promotes the budget.

And he says he looks forward to promoting the swimming pool policy. “At least he won’t have to borrow one of them.”

OBR: the economic outlook has brightened somewhatAs soon as the chancellor sat down, the Office for Budget Responsibility released its new assessment of the UK economy.

The fiscal watchdog confirms that the economic and fiscal outlook has “brightened somewhat” since its previous forecast in November.

The near-term economic downturn is set to be shorter and shallower; medium-term output to be higher; and the budget deficit and public debt to be lower.

But this reverses only part of the costs of the energy crisis, which are being felt on top of larger costs from the pandemic. And persistent supply-side challenges continue to weigh on future growth prospects.

The OBR says that Hunt has spent two-thirds of the improvement in the fiscal outlook on today’s budget measures, such as maintaining the energy price guarantee at £2,500 a year and on supporting business investment in the near term, “while boosting labour supply in the medium term”.

The OBR adds:

This lowers inflation this year and, more significantly, sustainably raises employment and output in the medium term.

Starmer accuses Tories of ‘dressing up stagnation as stability’ in budget responseKeir Starmer is responding to Hunt now. One of the budget traditions is that the leader of the opposition replies, not the shadow chancellor.

Starmer says this is supposed to be a budget for growth – but the figures show the economy is set to contract.

The UK “is on a path of managed decline”, and falling behind its competitors, he says.

He says the Tory cupboard is as bad as the salad aisle. The lettuce might be out, but the turnips are in.

He says the Tories are “a divided party caught between a rock of decline and a hard place of their own economic recklessness, dressing up stagnation as stability as their expiry date looms ever closer”.

Hunt says free childcare offer from age of nine months will cut childcare costs for families by nearly 60%Hunt ends with a final childcare announcement.

He says the government will offer 30 hours of free childcare for every child from the age of nine months, where all adults in the household work.

He says this will reduce childcare costs for families by nearly 60%.

Hunt says he wants schools to offer wraparound care from 8am to 6pm by 2026Hunt says he wants all schools to be able to offer wrap-around care from 8am to 6pm, either on their own or in partnership with other schools. He says the ambition is to have this in place by September 2026.

Hunt is now addressing childcare.

Childminders are a vital way to deliver affordable & flexible care.

To encourage more people to join the profession, new joiners will receive incentive payments of £600, rising to £1,200 for those joining through an agency.

— HM Treasury (@hmtreasury) March 15, 2023 Hunt says he will increase funding paid to nurseries, by £204m from this September, and rising to £288m next year. That is a 30% increase, which is what the sector, wanted, he says.

To support parents on Universal Credit move into work or increase their hours, we’re increasing the amount of UC support for childcare costs by almost 50% & will pay this upfront instead of in arrears.

Families will now be able to claim £951 for 1 child & £1,630 for 2 children.

— HM Treasury (@hmtreasury) March 15, 2023 Hunt says he will abolish lifetime allowance for tax-free pensions savings, and raise annual allowance to £60,000Hunt says he is going to increase the annual pensions tax free allowance from £40,000 to £60,000.

And he says instead of just lifting the lifetime allowance (currently just over £1m), he will abolish it.

That’s an unexpected rabbit out of the budget hat – there were rumours that the pensions lifetime allowance would be raised to £1.8m.

But it’s a rabbit that will benefit high earners – such as doctors, who have long said they have been hit by a pensions trap, partly due to the freezing of the lifetime allowance.

abolishing lifetime allowance for pensions is a whopping gift to high earners (do wonder how much pension anyone ultimately…needs if the suggested £1.8m limit isn’t enough)

— gabyhinsliff (@gabyhinsliff) March 15, 2023Hunt says he want more older people to return to work – although as someone aged 56, he prefers the term experienced, he says.

Referring to Dame Eleanor Laing, who is in the chair as deputy speaker, he says: “Madam Deputy Speaker I say this not to flatter you but older people are the most skilled and experienced people.”

If that was a joke, it did not seem to work. MPs seem to think he was being rude.

People say Hunt isn’t bold but this age-related gibes are extremely risky

— Giles Wilkes (@Gilesyb) March 15, 2023 Hunt says there will be skills boot camps for people in their 50s.

Hunt says sanctions will be applied more rigorously to people on benefits who refuse to look for work.

But the earnings threshold will be increased, from 15 hours per week to 18 hours.

Hunt says he will allocate £400m for mental health and musculoskeletal support. Occupational health is important to help people back into work.

And he says there will be a £3m pilot to help people with special needs transition into the workplace.

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