How will the spring Budget affect you? Our expert explains all you need to know
Enterprise, Employment, Education and Everywhere – Jeremy Hunt’s ‘four Es’ that together formed the bulk of his Spring Budget statement.
The idea is that the Chancellor’s policies will deliver:
- Growth for businesses and the economy
- Jobs for those on benefits, unable to afford childcare and at the end of their careers facing tax penalties for staying in work
- More maths, cheaper childcare and specially named ‘returnerships’ for older workers who want to come back
- For everyone everywhere
Jolly good, sounds like a great plan. Is it?
Spring budget 2023: Key points
- Seven key takeaways from today’s Budget
- Energy price guarantee to remain at £2,500 for the next three months
- 30 hours of free childcare for every child over the age of 9 months
- Pension changes coming in 2023 – from payment rises to tax cuts
To get the latest from the budget announcement visit Metro.co.uk's Metro's Budget news hub.
Hunt called it a Budget to ‘break down barriers that stop people working’ and announced a host of tax tweaks that aim to make it easier for people currently out of employment to get back in.
Do the claims live up to the hype? Or would Energy bill misery, Extortionate costs of living, Endless strikes left unresolved and Empty promises be a more appropriate set of Es?
Let’s have a look.
Policy change: More free childcare for working parents
What it means for you: On the face of it, doubling the number of hours of free childcare available to 30 a week so long as both parents are working a minimum of 16 hours per week sounds good.
Broadening its scope so that all children under the age of five will be eligible will also support more parents with older children back to work, at least part-time.
But it won’t be available any time soon. The staged implementation means waiting a year before two and three-year olds get their 15 hours of free childcare and two and a half years before all children under five get the full 30 hours.
It’s worth remembering that government must call a general election by 17 December next year. So any future government could decide to renege on the promise.
Policy change: Energy price guarantee extended and prepayment meter charges cut
What it means for you: The government calculates that keeping the energy price cap at its current level of £2,500, the average household will save £160.
Let’s just be real though – no-one is actually saving anything at all. One, the price guarantee does not cap annual energy bills at £2,500 – that’s just a random average number.
Two, this ‘saving’ is simply what the government is now not allowing energy companies to charge us from next month.
A cynic might say the planned rise to £3,000 was announced precisely to allow government to reverse the plan and ‘save’ us all this imaginary money.
The move to ban energy providers from charging customers with a prepayment meter more for their energy than customers who pay by direct debit is worth something though – £45 a year, working out at 87p a week.
Don’t forget though that from next month the £400 knocked off all household energy bills over the winter stops. So that £66 rebate each month will reappear on our energy bills in two weeks’ time.
Policy change: Lifetime pension tax scrapped
What it means for you: Abolishing the lifetime allowance for pension contributions is designed to stop senior doctors from leaving the NHS and over 55s leaving the workforce.
Currently, anyone who has saved more than just over a million pounds into their pension over their lifetime is hit with a whopping great tax bill – it ends up costing people money to keep working.
But let’s just rewind – this is a tax levied on people who have paid in more than £1million to fund their retirement.
Based on HMRC figures for 2020/21 that meant 8,610 (probably quite rich) people paid that penalty. That is one in a thousand pension savers.
In total, there were £382 million in charges. That’s money going straight back into those pockets and not into the public purse.
Budget case studies
Justin King, 54, runs a financial planning business and is delighted with the pension changes announced in the Budget.
The Government has scrapped the pensions lifetime allowance of £1,073m.
He told Metro.co.uk: ‘This is the total amount that can be paid into pensions without facing a potential 55% tax charge on withdrawals above the cap.
‘Meanwhile the amount that can be paid into a pension each year while benefiting from tax relief has risen from £40,000 to £60,000.
‘I pay £40,000 a year into my pension, and so does my wife Kathy, who also works for the family business (MFP Wealth Management).
‘We will now be increasing our pension contributions to £60,000 each year.
‘It makes sense as we can technically start withdrawing from our pensions soon so we may as well benefit from tax relief where we can.
‘The scrapping of the lifetime allowance is also fantastic news. At my current rate of saving, I’d hit the lifetime allowance within the next few years and it would have encouraged me to retire early.
‘I’ve got clients with £2m pension pots who are also delighted they’ll not have to worry about paying hefty tax charges.
‘The only issue is nothing is guaranteed. We could have a Labour government after the general election next year and they could reintroduce the cap.
‘But for the time being I’m really happy the Government has eased the pension restrictions.’
Annelies Paris, 25, is a primary school teacher and education content creator based in the south west.
She says she applauds the Government’s attempts to boost childcare funding, as the unaffordable cost of childcare is undoubtedly a factor in many parents returning to work only part-time or not returning to work at all.
However, Annelies has concerns about the ambition for all UK schools to offer ‘wraparound care’ by September 2026 and says schools must receive adequate funding from the Government to run before and after school care effectively.
‘Although it would be hugely beneficial for working parents and will hopefully be a more affordable option for parents and caregivers, the wraparound care promise seems to defeat or ignore the purpose behind the recent teacher strikes,’ she says .
‘Many of the teachers striking are seeking additional funding for schools, reduced workload and consideration for teachers’ wellbeing.
‘However, if schools are now expected to provide 8-6 care, how will this work?
‘My hope is that if this wraparound care is followed through, the Government will think clearly about its delivery and allocate the resources, funding and guidance needed to implement it effectively.
‘This scheme has potential, but they will have to explore this carefully so that it does not come at the cost of the school’s finances or that of its staff, their mental health or their families.’
Policy change: Tax cut for pubs
What it means for you: From 1 August, you’ll pay around 11p less for a pint in a pub than a pint from the supermarket. It’s a bid to keep British pubs from closing under crippling costs and the drop in footfall following the pandemic.
It also prompted one of Hunt’s more terrible Dad jokes: ‘British ale may be warm, but the duty on a pint is frozen.’
This move is part of a ‘new Brexit pubs guarantee’ – not terribly sure what that is though…
Policy change: Fuel duty frozen
What it means for you: The previously planned 11p rise in fuel duty in line with inflation was – surprise, surprise – abandoned. The 5p cut brought in last year under Rishi Sunak’s stint in the Treasury will stay for another year. And Hunt froze fuel duty for the 13th year on the trot. Together, the government says it’ll save motorists about £100 on average next year.
Policy no change: Business rates and corporation tax
What it means for you: There was no u-turn on corporation tax rising from 19 per cent to 25 per cent next month. There was also nothing new on business rates.
Taken together, it will mean some businesses will collapse under the weight of already high and rising tax bills.
Business rates are particularly important for companies with a presence on the British high street as only businesses with a physical premises have to pay the levy. Businesses that trade online only are exempt.
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