The Chancellor, Jeremy Hunt, has given his Spring Budget 2023 to the House of Commons this afternoon. His key message was growth – he wants the Spring Budget to boost the economy through employment, education and investments. The headlines were dramatic but we know the devil is in the detail, so how will the proposed policies affect you?
The Chancellor relied heavily on the latest predictions by the OBR, which stated that due to improving global conditions and actions taken by the government after the mini budget last October, the UK is now expected to avoid an economic recession.
Whilst the economy is still on track to shrink, this will be by 0.2% rather than the previous prediction of 1.4%.
The prediction from the OBR is a lot less gloomy than before, however just bear in mind that it is only a prediction – the OBR predicted that inflation would reach 8.9% at the end of 2022, when in reality it reached 11.1%.
The energy cost rises have been top of the headlines for a while now.
The Government’s Energy Price Guarantee, which was put in place last year to subsidise household energy costs, was scheduled to end in April. This would have seen the amount that a typical household pays per year, rise from £2,500 to £3,000, which would add more financial stress to already stretched households.
The Chancellor announced that support will now continue at the same level, meaning that families will save around £160 on their energy bills and cost the Treasury around £3billion.
He also announced that households on pre payment meters will have their prices put in line with those on direct debit payments. This stops the discrimination that was happening to those who are generally on the lower end of the economic scale because they happen to be the ones placed on these pre payment meters. This move is expected to save about four millions households around £45 per year.
A planned rise in fuel duty has been delayed. Fuel duty usually rises in line with RPI inflation, yet this would have added 7p to the price of a litre of fuel plus a 5p fuel duty cut that was due to expire, would have taken this to an 12p rise in effect.
This was a controversial annoucement and one that benefits the top 1% of earners in the country.
The tax-free limit for pension savings during a lifetime will be abolished in April. At present, you can save just over £1m before an extra tax charge is applied. The impact will be lots of money being put into pensions by wealthy savers.
The annual allowance will remain in place, but will go up from £40,000 to £60,000, after being frozen for nine years. Those who are already drawing a pension, but want to save more will be able to put in £10,000 a year, up from £4,000.
This was the big headline grabbing moment – free childcare from nine months’ old.
The catch? It is being rolled out in stages from next April 2024, with the policy being fully implemented by the end of 2025.
It is essentially a plan to be implemented by the next goernment – and will the Conservatives be in power then? From one perspective, this is really positive news for working families because the cost of childcare is a barrier to working – especially to women in the workplace with many dropping out and leaving their careers because of the childcare cost. The relentless campaigning by charities such as Pregnant then Screwed has paid off to an extent and goes some way to helping women get back into the workplace, but it does not help families now who are crying out for financial help with childcare costs. It also did not go into detail on how it would be funded for the childcare providers themselves.
Within this childcare announcement, the Chancellor also mentioned funding would be available for before and after school care for school aged children. He also pledged that families on universal credit would be able to receive money up front rather than claim back childcare costs. They would also be subject to a rise in benefits for the childcare provision.
As always, the Spring Budget speech is full of headline grabbers. It is the detail within the statement which gives us the winners and the losers.
Opponents are saying that the Budget is full of stealth taxes that will wipe out any support that was offered to families. The tax thresholds have been frozen which will lead to a further total tax income of £120billion over the next five years, yet 3.2 million people will be pushed into paying income tax and a further 2.1 million people will be pushed over into the higher rate. Add this to the rising food prices and the increasing mortgage payments, then you get people in more need of financial help.
Living standards are still expected to fall despite the help that the Chancellor has proposed, meaning that he probably has not gone far enough. Although the decline in standards is not as bad as had been predicted, it is still the worst decline since records began.
According to people interviewed on various news outlets throughout today, there is no feel good factor to the Spring Budget 2023. It is more a case of relief that it is not necessarily going to get as bad as had been predicted at the end of last year.
Critics have questionned why the Chancellor could not have done other things to ease the declining living standards. At a time where there is discontent in the public sector in terms of pay and conditions, couldn’t he have eased this? Could the National Living Wage have been increased more? Could the tax break that he gave to the top 1% of earners be given somewhere else?
If you need advice with your debts and do not know which way to turn, we may be able to help you. Please contact us to speak to one of our expert advisors who will point you in the right direction.
