Jeremy Hunt has said the UK will avoid recession this year in his Spring Budget announcement, as he announced a series of new fiscal measures.
He said: “Today the Office for Budget Responsibility forecast that because of changing international factors and the measures I take, the UK will not now enter a technical recession this year”.
Proclaiming that the economy is “on the right track”, he pointed to a “British economy that is proving the doubters wrong”.
The chancellor also announced that inflation is forecast to fall to 2.9% by the end of 2023. Last November, the Office for Budget Responsibility predicted that the average inflation rate for 2023 would be 7.4%.
Mr Hunt said that the fall in inflation would, in part, be due to the measures announced today.
In terms of new measures, the budget focussed on prompting those who have left their jobs to return to the workforce, extending energy support and expanding free childcare provision.
On energy, Mr Hunt confirmed that the energy price guarantee will be extended for a further three months from April to June at its current level, saying he had listened to Martin Lewis’s advice on the matter.
The planned £500 hike in average energy bills, which was due to come into force next month, will be cancelled by the budget.
The move will see bills for the average household staying at around £2,500, instead of going up to £3,000.
Mr Hunt said the extension of support will save the average family a further £160 on top of support measures already announced.
Mr Hunt also announced that energy charges for prepayment meters will be brought into line with prices for customers paying by direct debit.
As trailed, the chancellor announced 30 hours of free weekly childcare for working parents is being extended to cover children below the age of three — and will eventually cover all children from the age of nine months.
Mr Hunt said he wanted to reform the childcare system, warning: “We have one of the most expensive systems in the world. Almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.
“For many women, a career break becomes a career end. Our female participation rate is higher than average for OECD economies, but we trail top performers like Denmark and the Netherlands. If we matched Dutch levels of participation, there would be more than one million more women who want to work, in the labour force. And we can”.
Announcing moreover that the pension lifetime allowance would be scrapped, Mr Hunt said: “Some have also asked me to increase the Lifetime Allowance from its £1 million limit. But I have decided not to do that. Instead, I will go further and abolish the Lifetime Allowance altogether.”
The policy will affect around 7,000 people and will be worth £1 billion a year by 2027/8.
There were also commitments on taxes. The main rate of corporation tax, paid by businesses on taxable profits over £250,000, was confirmed to increase from 19% to 25%.
However, the chancellor announced tax breaks and other benefits for 12 new Investment Zones across the UK, funded by £80m each over the next five years.
The government also committed to raising defence spending by £11bn over the next five years. It would be part of a pledge to boost the defence budget to 2.5% of GDP from just over 2% now; although the chancellor cautioned that this would only happen when “fiscal and economic circumstances allow”.
The key announcements include:
- Energy price guarantee to stay at £2,500 for the next three months
- 30 hours of free childcare for children aged over nine months with working parents by September 2025
- Pre-payment meter charges in line with comparable direct debit charges
- The £1m lifetime allowance on pensions to be abolished
- New £63m fund to keep public leisure centres and pools afloat
- Corporation tax confirmed to rise from 19% to 25%
- Charities department to get a new cash injection of £100m
- £10m over two years to help the voluntary sector with suicide prevention
- From 1 August, duty on draught products in pubs 11p lower than supermarkets
- Fuel duty will be frozen for the next 12 months
- “Great British Nuclear” to help nuclear provide one quarter of electricity by 2050.
Responding to the chancellor’s statement, Labour leader Sir Keir Starmer said the one tax cut in the Budget, scrapping the pension lifetime allowance would only help the richest 1% in society.
Sir Keir added that the chancellor’s Budget was “dressing up stagnation as stability”, claiming it put the country “on a path of managed decline”.
He added that working people who were earning deserved better than “cheap tricks from government of gimmicks”.