Jeremy Hunt insists his Budget will get young parents and over-50s back into work – and it will not just benefit the rich who are saving for retirement.
The chancellor told the BBC he wanted to fill a million vacancies across the UK so firms can “grow faster”.
He plans to expand free childcare in England and scrap the £1m cap for tax-free pension savings.
Labour says the pensions move will only help the richest 1% – and Mr Hunt was “dressing up stagnation as stability”.
In his Budget speech, Mr Hunt claimed the UK economy will avoid a recession, with inflation predicted to more than halve by the end of next year.
But he said a shortage of workers is holding back growth, and he wants more over-50s, people with disabilities and parents of young children to get back to work.
Offering eligible working parents with children as young as nine months old in England 30 hours of free childcare is a key part of the plan – but it will not be introduced fully until September 2025.
Mr Hunt said he would like to have extended childcare help sooner, but it first needed a big increase in the number of childminders and nurseries.
As well as scrapping the £1m cap on the amount people can save for their pensions before it is taxed extra, he increased the tax-free allowance on pensions from £40,000 to £60,000 – in a move to encourage senior teachers and doctors to keep working.
Asked about criticism that it was a “Budget for the rich”, allowing people who are already well off to save more for their pensions, he said: “Well, of course we want to help older people who want to stay in work.
“By definition, they will generally be on higher salaries, but nearly five times more help is going to young parents to help them with childcare costs, a nearly 60% reduction in childcare costs of £6,500 a child.
“That will make a huge difference to families. But also it will make a huge difference to businesses who worry, particularly smaller businesses that they are losing valuable employees when they start a family.”
The government’s independent forecaster, the Office for Budget Responsibility (OBR), says the chancellor’s policies are likely to add about 110,000 people to the UK workforce, depending on how they react to the various incentives.
Asked why after 13 years of a Conservative government a whole generation is not doing as well as their parents had, Mr Hunt said his growth plan meant “better jobs and better opportunities”.
“We had half a million people who left the labour force during the lockdowns, that’s an effect you haven’t seen in other countries and that’s why I’ve announced the measures I’ve announced today to encourage people back to work,” he added.
One senior government figure described it as “a steady as she goes Budget”, after the turbulence of Liz Truss’s short-lived premiership.
The OBR said the UK economy will shrink by 0.2% next year, which is better than previously forecast and does not, technically, count as a recession.
Inflation is forecast to fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.
Living standards are still expected to fall by the largest amount since records began, according to the OBR, but the decline will not be as bad as it had forecast in November.
The economy is predicted to return to growth – but house prices are projected to fall by 10% by 2025.
The OBR also highlighted Rishi Sunak’s April 2021 decision, when he was chancellor, to freeze tax thresholds, which it said amounted to the equivalent of a 4p increase in the basic rate of income tax.
That move, dubbed a “stealth tax” by critics, is due to come into effect next month and will increase government income by £29.3bn a year.
Meanwhile, there was no announcement in this Budget of extra money for public sector pay, as a wave of strikes by workers including junior doctors, teachers and rail staff continues.
In his speech, Mr Hunt also pledged an expansion in wraparound care at the start and finish of the school day for parents with older children and changes to staff-to-child ratios in England to expand supply of childcare, although the target date for the measure was September 2026.
And he announced plans to abolish Work Capability Assessments, which he said would “separate benefit entitlement from an individual’s ability to work”.
From 2026, the government will use another test, currently used to assess eligibility for Personal Independence Payments, the main disability benefit, to decide if someone is eligible for additional payments.
Other measures unveiled in the Budget include:
- Extending support for energy bills at current levels for a further three months
- Charges for people with prepayment meters will be brought in line with those for direct debit customers, saving them £45 a year on their energy bills from July
- Tax on alcohol to go up by 10.1% from 1 August
- But duty charged on draught pints to be frozen, to help “the great British pub”
- Tax on tobacco to go up by 2% above inflation
Labour leader Sir Keir Starmer said: “After 13 years of his government, our economy needed major surgery, but like millions across our country, this Budget leaves us stuck in the waiting room with only a sticking plaster to hand.
“A country set on a path of managed decline, falling behind our competitors, the sick man of Europe once again.”
SNP economy spokesman Stewart Hosie said: “It’s truly pathetic that the chancellor has failed to cut energy bills, despite having ample resources to do so.”
Liberal Democrat leader Sir Ed Davey said: “This Budget shows the Conservative Party is so out of touch they might as well be living on another planet.”Jeremy Hunt and Rishi Sunak had a chance to show they care about the cost-of-living crisis that’s hitting millions of Britain’s families and pensioners but they failed miserably.”