Jeremy Hunt is introducing a “return to work” budget today, with free childcare for children under three and tax incentives to keep people paying pensions longer.
Fueled by a marginally brighter economic outlook, the Chancellor will announce some important moves to address post-Covid levels of inactivity in the workforce.
Most parents are expected to get up to 30 hours of subsidized child care for one- and two-year-olds, based on the current provision for preschool-age children.
A planned increase in the cap on average energy bills next month is also being scrapped to ease pressure on struggling families, while a long-standing freeze on the fuel tax is to be extended.
Despite months of lobbying by parliamentarians and businesses, the Chancellor will go ahead with raising corporate tax from 19 to 25 percent and Rishi Sunak’s ‘super deduction’ scheme is coming to an end. He will also reject pleas for early income tax cuts.
However, there will be new tax breaks for companies investing in the UK, and it is claimed that they could be worth up to £11bn a year.
Chancellor Jeremy Hunt pictured preparing for his spring budget last night
Lower-than-expected borrowing numbers, a drop in wholesale energy prices and a slightly improved GDP outlook have created some good news for the Treasury on public finances.
The Office for Budgetary Responsibility is likely to update the forecasts, after predicting in the last fiscal package in November that the economy would contract 1.4 percent this year.
However, the overall picture remains difficult and Treasury sources insist the chancellor will proceed cautiously and prioritize balancing the books to combat skyrocketing inflation.
Conservative MPs are desperate for today’s package to hold together, warning this is the moment that could dictate the fate of Sunak’s premiership.
Hunt promises a growth plan that will remove “barriers that prevent companies from investing” while “addressing the labor shortage that prevents them from hiring” and “break down the barriers that prevent people from working.”
At the center of that plan will be a series of measures designed to encourage those over 50, the ill and long-term disabled, and claimants for benefits to return to the workplace.
The Chancellor is set to announce abolishing the system used to assess eligibility for sickness benefits, paying parents up front for the universal childcare credit and increasing the amount they can claim by several hundred pounds.
Working parents with three and four year olds can currently claim 30 hours of free care a week unless one earns more than £100,000.
And families with two-year-olds are entitled to 15 free hours if they claim benefits.
But according to Hunt’s plans, the program will be massively expanded so that working parents can get 30 free hours a week when their children are one or two years old.
The hourly rate that the government pays to providers is also expected to increase.
Childcare fees in the UK are among the highest in the world, with spiraling costs in areas such as energy and food forcing nurseries to raise their fees to levels some parents can no longer afford.
However, funding shortages for the 30-hour provision have caused daycare centers to close, while others have pushed the costs onto parents of younger children.
Changes to pensions are also expected, with the Chancellor likely to allow workers to put more money into their pension fund on a pre-tax basis by removing the lifetime pension allowance.
The Treasury confirmed this morning that the planned £500 increase in average power bills, due to come into effect next month, has been abandoned.
Instead, the level will remain at £2,500 for at least another three months, by which time prices are expected to have fallen again.
Action must also be taken on prepaid meters with Mr. Hunt removing the so-called ‘prepaid premium’ from July.
The Chancellor vows to “harness British ingenuity to become a scientific and technological superpower” as he sets out a roadmap for the country’s economic future.
Childcare is shaping up to be a key battleground ahead of next year’s election and Labor has vowed to make it a priority if they win.
Labor MP Stella Creasy, who has campaigned on the issue, last night called Hunt’s plan “economically illiterate”, warning it would boost demand without addressing supply.
Neil Leitch, chief executive of the Early Years Alliance, said “the devil was in the details”, adding: “We know from hard experience that what may seem like an impressive investment in theory can end up being totally inadequate in practice.”
“It will be key to understand exactly how this announcement will translate into changes to the funding rate per hour, especially in light of the extension of the 30-hour offer to one and two-year-olds.”
Paul Johnson of the Institute for Fiscal Studies said many would welcome any announcement to push for free child care.
But he warned that the system was “enormously complex”, adding: “As universal support has been expanded, targeted support for children most in need has been reduced.”
Shortages of funds for the 30-hour provision have caused daycare centers to close, while others have pushed the costs onto parents of younger children.
The Chancellor will appear in the House of Commons today at 12:30pm and say he wants his ‘Budget for Growth’ to make Britain one of the most prosperous countries in the world.
As he resists pressure from Conservative MPs for major tax cuts, he will unveil a series of policies designed to stimulate the economy.
He is expected to reject the ‘decline narrative’ and vow to harness the country’s competitive advantages to spread wealth and opportunity.
Official figures yesterday showed that vacancies across the UK have fallen for the eighth month in a row, as businesses hold back from hiring amid troubles in the broader economy.
Mr Hunt will offer an olive branch to companies with plans for 12 low-tax “investment zones” and will try to encourage older workers to stay on the job with boot camps, training and “mid-life MOTs” .
The latter are designed to help people make informed decisions about their finances and retirement.