Chancellor Jeremy Hunt has unveiled his new budget for 2023, with major announcements made around pensions, childcare and energy costs.
The cost of living has placed huge pressure on millions of households across the UK. As a result, many of the new - and extended - policies introduced by Hunt take aim at rising bills.
Despite the economic pressure, the Chancellor has insisted that the effects of the 2023 budget will “prove the doubters wrong”. A raft of announcements were made around topics such as the energy price guarantee, alcohol duty and corporation tax.
Hunt said during his announcement in the House of Common on Wednesday: “In the face of enormous challenges I report today on a British economy which is proving the doubters wrong. In the autumn we took difficult decisions to deliver stability and sound money. Since mid-October, 10-year gilt rates have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked.”
But what were the main points from his budget statement? Here’s everything you need to know.
Hunt announced a raft of new childcare policy changes during his first budget. One of the main points of his announcement was that 30 hours of free childcare will now be available for children aged under five, from the moment maternity leave ends.
The government hopes to encourage young parents back into work after maternity leave, in hope that getting more people into the workforce will boost the economy. However, critics have pointed out that the offer of free childcare hours is dependent on the availability and staffing in certain areas.
Also announced was a change to minimum staffing levels. Nurseries in England will now match staff-to-child ratios of Scotland, moving from 1:4 to 1:5.
Fuel duty was originally cut during the last budget amid soaring prices at petrol stations. Hunt confirmed during his statement in the House of Commons that the scheduled increase in fuel duty will once again be delayed until at least March 2024, owing to high inflation.
The 5p per litre reduction, which had been originally introduced by Rishi Sunak in March 2022, will remain unchanged. This in turn means that the levy on petrol and diesel will remain at 52.95p per litre.
Alcohol duty was another area targeted by Sunak in 2022 and again by Hunt in 2023. Hunt had originally postponed the planned increase in December 2022 until 1 August 2023, with the budget announcement confirming that alcohol duty will rise in line with inflation from this date.
The Chancellor has also introduced a new scheme which may mean that draught beers. A draught relief scheme, labelled as the ‘Brexit pubs guarantee’, will be introduced from 1 August 2023.
It will see draught beverages in pubs save up to 11p on duty compared to the same drink bought in a supermarket. However, items such as bottled or canned beers, wine and spirits will not be affected by this reduction.
The energy price guarantee has been extended for a further three months due to the high cost-of-living. This means that households will see an energy cap of £2,500 remain in place.
The cap was originally due to rise to £3,000 but will now stay frozen at its current level until at least June. It comes as wholesale gas prices continue to fall, Hunt saying that freezing the current level will “bridge the gap” until the prices worldwide fall below the cap.
Charged for the use of prepayment meters will also come in line with charges for those on direct debit payments. This could see around four million households save £45 per year.
Corporation tax is set to increase from 19% to 25%. This policy change had already been mooted ahead of the budget announcement.
The new tax rate will only affect businesses which make over £250,000 profit from April 2023. Hunt said in his statement that around 10% of UK companies will see their corporation tax increase.
The Chancellor has confirmed that the lifetime allowance limit on pensions has been abolished. This means that the limit to the amount of money you accumulate in your pension before paying extra tax on this has been scrapped.
Hunt hopes that the move will make it “easier” for those over 50 to work for longer. He pointed out that it would “stop over 80% of NHS doctors from receiving a tax charge”, with professions such as those in the medical field able to retain workers for longer.
There has been much said about whether or not the UK finds itself in the middle of a recession. In his statement, the Chancellor stated that the Office for Budget Responsibility’s (OBR) analysis shows that the UK will avoid a “technical recession”.
The OBR has predicted that the UK will narrowly avoid the parameters of being placed into a recession. A recession is office when there has been two quarters of negative growth in a row.
However, not all is rosy as the group still warned that living standards are set to decline throughout 2023 and the economy will slightly shrink. Hunt’s optimism over the forecast comes from the fact the the OBR’s new prediction is nowhere near as bleak as the prediction in November 2022.
Throughout his budget, Hunt had insisted that bright things were ahead in the future, despite measures such as the energy price guarantee and fuel duty freeze being extended as households cope with consistently high inflation. The Chancellor did however claim that the Prime Minister’s aim of halving the inflation rate is on track to happen by the end of the year.
His claims have been backed up by the OBR. The group forecasted that inflation in the UK is set to climb down from 10.7% in the final quarter of 2022 to 2.9% by the end of 2023.
This means that pressure on household bills such as food, fuel and energy could stop seeing huge jumps in prices over short periods of time.