What does the Budget mean for me? How will UK Spring Statement 2023 affect me - from childcare to alcohol
Chancellor of the Exchequer Jeremy Hunt gave a speech focused on growing the economy, with announcements including changes to pension rules and energy bills
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The Chancellor unveiled four ‘Es’ - Everywhere, Enterprise, Employment, Education - as part of what has been dubbed the ‘back to work’ Budget. It comes as the UK continues to post low GDP growth, with the Office for Budget Responsibility (OBR) saying the country will avoid a ‘technical’ recession - albeit with the country’s economy likely to shrink 1.4% over the coming year.
But his speech was as much about what Hunt didn’t announce as what he did. There was no room for inflation-busting public sector pay increases, no investment in subsidies for energy bill-lowering insulation or other green grants, and no extra money for departmental budgets - defence aside - that have been eroded by inflation.
What we did get was extra support for parents, continued help for motorists, and a decent payday for people with large pension pots. The measures have had a mixed response so far, with some of the country’s wealthiest people likely to benefit at the same time as household incomes see their biggest squeeze since 1957.
So, how will some of the key announcements from the Spring Budget affect you?
Announced in advance of the Budget, energy bills are set to remain at their current rate under the energy price guarantee, as the government delayed a 20% hike until the summer.
While the decision to not implement athe20% hike (equivalent to an extra £42 a month on average) will ensure households don’t face an energy bills cliff edge in April, it’s likely your gas and electricity costs will still rise - albeit until the weather improves.
Why? The government’s £66/£67 energy bill grants are coming to an end after your March energy bill. But with wholesale prices coming down, and likely to be reflected in domestic prices from July onwards, your energy outgoings should come down a little as we get into the latter half of 2023.
Jeremy Hunt’s big ‘rabbit out of the hat’, which ended up being leaked to the Guardian in advance of his Budget, was his plan to extend state childcare support to more parents.
Children of ‘working parents’ (i.e. those earning the equivalent of at least 16 hours at the minimum or living wage) between the ages of nine months and five-years-old will be eligible for 30 hours of free childcare per week, for 38 weeks a year. The idea is that expanding state support will allow more parents to return to the workforce, thus boosting the UK’s GDP.
However, the big thing to note if you’re a parent is that the free hours are not going to fully kick in for another two-and-a-half years. From April 2024, two-year-olds will get 15 hours of free child care, with nine-month-olds joining them six months later, before the full 30 hours kicks in from September 2025.
There are also big questions about whether the government has provided early years providers, like nurseries, with enough funding to deliver on its big pledge to parents. With the sector already in a poor state of health, it’s likely to be a postcode lottery as to whether or not you will be able to access the free hours.
There were no fresh increases to the tax burden on UK households. While this was expected, given Jeremy Hunt had already hiked taxes significantly in his Autumn Statement, it will no doubt come as a relief to households.
But it should be noted that council tax will be going up from April, while tax hikes announced by Hunt in November, including to income tax (via the freezing of its bands) and capital gains tax, will also be going up.
From August, alcohol prices will also rise as a result of an effective tax increase brought about by the new inflation-linked alcohol duty system. Even with a draught relief scheme coming in on beers and ciders poured in pubs and bars, most drinkers are likely to see the cost of living squeeze hit their tipples this summer.
The only real-terms tax cuts came in the form of a continuation of the fuel duty freeze, and changes to pensions. On the latter front, you can now put away £60,000 a year without being taxed (a 50% rise on the previous £40,000 allowance), while the lifetime allowance - the total amount you can put away for retirement without being taxed - has been abolished.
These changes to pensions rules - intended to get over-50s back into work - have been attacked by Labour for only being likely to benefit the richest people in society, while the Institute for Fiscal Studies has said they will only get a “small number” of workers back onto the payroll.
One of the government’s key promises has been to significantly reduce the inflation rate over the course of 2023 - although it actually has very little power to influence it, with the Bank of England playing a much more significant role.
But the OBR report accompanying the Budget has confirmed that the rate of price rises will drop away as the year goes on. It is expected to decrease to 2.9% by the end of the year - news that means our purchasing power will not be eroded by quite so much as the year progresses. The thing to note is that a shrinking economy makes pay rises harder to come by, so even when inflation is lower, we’re still likely to be experiencing a cost of living squeeze.