Hunt splashes cash in push for growth
THE Chancellor yesterday promised major changes to benefits, further energy bills support and tax breaks for businesses in Budget measures aimed at boosting economic growth.
Jeremy Hunt said a recession would be avoided and inflation would fall dramatically as the economy was “proving the doubters wrong”.
However, fiscal watchdog the Office for Budget Responsibility warned that people are still expected to face the biggest fall in living standards on record over the next 12 months.
Wales will receive an extra £180m as a consequence of the spending decisions across the border, but Wales’ Finance Minister, Rebecca Evans, condemned Mr Hunt’s Budget, saying it was a “less-than-bare-minimum Budget”.
First Minister Mark Drakeford said: “He had the financial levers and capacity to provide comprehensive and meaningful support but chose not to meet the scale of the task ahead.”
In an effort to remove barriers to work, Mr Hunt promised up to 30 hours a week of free childcare for eligible households in England with children as young as nine months, instead of three- and four-year-olds under the current policy.
But the Welsh Government stopped short of committing to offer the same level of support to working parents in Wales that the UK Government now plans to introduce in England.
Welsh Conservative shadow minister for social services Gareth Davies MS said: “I am calling on the Labour government to allocate this new money to expand childcare in Wales, as opposed to letting these funds get sucked up into their ever-growing list of vanity projects.”
JEREMY Hunt yesterday promised major changes to benefits, further energy bills support and tax breaks for businesses in Budget measures aimed at boosting economic growth.
Using a £25bn-a-year improvement in the public finances, the Chancellor said he would “remove barriers” to growth and investment and get more young parents and over-fifties back to work.
Among the major announcements were a U-turn on plans to cut UK Government support to households for energy costs, an expansion of the government’s free childcare support and changes to taxes, benefits and pension allowances.
Speaking in the Commons, Mr Hunt said the UK will not enter a recession this year, as previously forecast, with the economy contracting 0.2% and unemployment rising less than one percentage point compared to the autumn forecast.
As with any major budget announcements made by Westminster, not all of the changes will apply in Wales. Many powers are devolved to the Welsh Government, which decides whether it will follow the UK Government in any of its measures.
Here is what it means for you if you live in Wales.
■ Energy price guarantee extended
The Chancellor confirmed that the UK Government’s energy price guarantee will stay at £2,500 for an additional three months from April to June.
The price guarantee, which caps the typical household bill at £2,500, was supposed to rise to £3,000 next month but the government had been under increasing pressure to cancel the increase with energy costs still high. It is estimated that Mr Hunt’s decision to retain the current guarantee will save the typical household £160. It’s estimated it will cost the government £3bn.
Energy bills are currently forecast to fall even further in July, with consultancy firm Cornwall Insight currently predicting the price cap, which regulated the maximum a household could pay for its bills until it was replaced by the government’s guarantee, will be £2,201 in July – below the planned £3,000 guarantee from that date.
However, most energy customers will still see an increase in their bills from April. This is because the government’s energy support scheme, which has been giving households £400 off their energy bills over six months, is ending in March, so householders and businesses will not get the discount from April onwards.
Free childcare extended to children over nine months in England
The UK Government also announced it will extend its 30 hours a week of free childcare for working parents to children aged from nine months. Previously only those with children aged three and four were entitled to the support, and Mr Hunt said the change would reduce childcare costs by around 60%.
From April 2024, this will be rolled out for working parents of two-yearolds at 15 hours per week, before being rolled out fully by September 2025.
However, the announcement only applies to England and not in Wales, where only parents of three- to fouryear-olds can receive help with childcare costs. The Western Mail has approached the Welsh Government for comment on whether it will follow the UK Government in extending its support. Mr Hunt also said he would introduce pilot incentive payments for childminders of £600, rising to £1,200 for those who join through an agency.
■ Schools
Mr Hunt said the UK Government will fund schools and local authorities to increase supply of wraparound care so all parents of school-age children can drop their children off at 8am and collect them at 6pm. He said he hoped all schools will start to offer a wraparound offer, either on their own or in partnership with other schools, by September 2026. This will only apply in England.
This again mirrors plans the Welsh Government has been working on in Wales, with trials taking place in schools to extend the school day here.
■ Benefits and employment
Mr Hunt also announced big changes for Universal Credit claimants, including a ramping up of sanctions for those who do not look for or take up employment.
Saying “work is a virtue”, Mr Hunt said there are around one million vacancies in the economy and seven million adults not in work. Referring to two million people inactive due to a disability or illness, Mr Hunt announced the government would abolish the work capability assessment and said sanctions would be applied “more rigorously” for those who do not undertake specific work search requirements or take up reasonable job offers. The administrative earnings threshold will also go from 15 to 18 hours at the national living wage – anyone below this will face more intensive work search regimes.
He also announced a new programme called Universal Support to help disabled people get into work. Up to £4,000 will be spent per person, and the scheme could help up
to 50,000 people per year, he said. New apprenticeships for over-fifties who want to return to work, called ‘Returnerships’, will also be set up and will operate alongside skills boot camps and sector-based work academies.
Mr Hunt confirmed benefits and tax credits will rise by 10.1% from April 2023, in line with the Consumer Prices Index (CPI) rate of inflation in September 2022. The Chancellor also announced the government will start paying childcare support to parents on Universal Credit upfront, rather than in arrears, and increasing the amount they can claim to £951 for one child and £1,630 for two children.
Many parents on a low income already find it hard to afford the upfront cost of childcare, and find it difficult to get into work as a result.
■ Fuel duty and other duties
The Chancellor has retained the freezing of fuel duty for another 12 months, also maintaining the 5p cut he announced last year. He said this would save the average driver around £100 a year.
He also announced some support for pubs, saying: “Today I will do something that was not possible when we were in the EU and significantly increase the generosity of draught relief. From August 1 the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.”
He added that the duty on alcohol would not rise, saying: “British ale is warm but the duty on a price is frozen.”
■ Pensions
Mr Hunt said he would increase the pensions annual tax-free allowance from £40,000 to £60,000 and will abolish the lifetime allowance – previously
set at £1.07m.
■ Taxes
Corporation tax for businesses is to increase from 19% to 25%. Firms which make a profit of more than £250,000 will pay 25% tax on their profits from April.
Mr Hunt also announced tax breaks for drug companies and creative industries, launching an enhanced credit which means that if a qualifying small or medium-sized business spends 40% or more of their total expenditure on R&D, they will be able to claim a credit worth £27 for every £100 they spend.
“That means an eligible cancer drug company spending £2m on research and development will receive over £500,000 to help them develop breakthrough treatments.” Mr Hunt said this was a £1.8bn package of support.
On the film and TV industry, he said: “To give even more momentum to this critical sector I will introduce an expenditure credit with a rate of 34% for film, high-end television and video games and 39% for the animation and children’s TV sectors. I will maintain the qualifying threshold for high-end television at £1m.
“And because our theatres, orchestras and museums do such a brilliant job at attracting tourists to London and the UK, I will also extend for another two years their current 45% and 50% reliefs.”
■ More money for leisure centres
Mr Hunt said he will be providing a £63m fund to keep our public leisure centres and pools afloat. This will not apply to Wales but there may be extra money for Wales because of this announcement. We will know more once the Treasury publishes the details.
■ Spending
Mr Hunt said his spending plans will mean “an additional £320m for the Scottish Government, £180m for the Welsh Government and £132m for Northern Ireland”.
He also announced £20m for the Welsh Government to restore the Holyhead Breakwater. Further, he announced a number of “investment zones” – regeneration projects similar to Canary Wharf or Liverpool Docks – spread across the West Midlands, Greater Manchester, the North East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be at least one in each of Wales, Scotland and Northern Ireland.
■ Nuclear
As part of his plans for a “clean energy reset”, Mr Hunt confirmed the launch of Great British Nuclear (GBN) to oversee the delivery of new power plants to meet the aim for nuclear to provide 25% of electricity by 2050. Mr Hunt confirmed that nuclear power would be classed as environmentally sustainable, subject to consultation. The decision is aimed at attracting private funds into the nuclear power sector. There are plans for small nuclear power plants at Trawsfynydd, Gwynedd, and Wylfa, Anglesey.
He also announced the first competition for small nuclear reactors to be completed by the end of this year.
■ Carbon capture
Mr Hunt said he was allocating £20bn of support for the early development of carbon capture, usage and storage, “starting with projects from our east coast to Merseyside to north Wales”. He said this would support up to 50,000 jobs, attract private-sector investment and help capture 20 million-30 million tonnes of CO2 per year by 2030.