Is Jeremy Hunt's performance on childcare and pensions enough?

‘Britain WILL prove doubters wrong’: Chancellor Jeremy Hunt predicts plunging inflation, falling debt and rising growth, insisting ‘the optimists are right’… but Tory sceptics slam his Budget’s tax burden and ask: Has he done enough?

• Jeremy Hunt declared the UK economy has a ‘future of enormous potential’ 
• Predicted double-digit inflation would plunge to 2.9 per cent by the end of 2023
• Read more:  Childcare and pension tax breaks in Hunt’s ‘back to work’ Budget

Britain will ‘prove the doubters wrong’ and avoid a recession, Jeremy Hunt said yesterday.

Unveiling a £21billion package to boost growth, the Chancellor declared the UK economy had a ‘future of enormous potential’.

He predicted that double-digit inflation would plunge to just 2.9 per cent by the end of this year, easing the cost of living crisis. And he said that gloomy experts and Labour, which has long predicted a recession, would be confounded – with the Office for Budget Responsibility expecting a downturn to be avoided.

Tory MPs warned that Mr Hunt had to move faster to cut a soaring tax burden that now includes a £120billion raid on six million workers. But the party’s strategists hope his ‘steady as she goes’ Budget will prove the start of a fightback on the economy, ahead of potential tax cuts next year.

Mr Hunt told colleagues he believed the package would ‘help us win the next election’, adding: ‘There is no path for us without a reputation for economic competence.’

Unveiling a £21billion package to boost growth, Chancellor Jeremy Hunt declared the UK economy had a ‘future of enormous potential’

In the 2023 Spring Budget, it was announced that working parents would be offered up to 30 hours of free childcare for children aged nine months and over from September 2025

But former Cabinet minister Jacob Rees-Mogg warned the tax burden – heading for a post-war record of 37.7 per cent of national income – risked making the Tories indistinguishable from ‘the socialists’.

And official figures revealed that so-called ‘fiscal drag’ caused by a freeze in income tax thresholds will see workers pay £120billion in extra tax over the next five years.

Mr Hunt refused however to commit to cutting taxes before the election, saying he was ‘not interested in playing games’. Setting out a ‘Budget for growth’, he unveiled childcare reforms he said could ultimately help a million stay-at-home mothers return to work.

READ MORE: Jeremy Hunt says he wants a MILLION more women in jobs as he unveils free childcare boost and plan for breakfast clubs at ALL schools in ‘back to work’ Budget – with tax penalties ABOLISHED on big pension pots to stop doctors quitting NHS

 

In a dramatic move, he also completely scrapped a pension savings limit blamed for encouraging thousands of doctors and other well-paid professionals to retire early.

The Chancellor has faced fierce criticism from business and some Tory MPs over a planned rise in corporation tax from 19 per cent to 25 per cent next month. In a nod to their concerns he unveiled a £10billion tax break for firms investing in their business, wiping out half the cost of the corporation tax rise.

The Chancellor said the economy was ‘proving the doubters wrong’, adding: ‘Today we build for the future with inflation down, debt falling and growth up.

‘The declinists are wrong, and the optimists are right. We stick to the plan because the plan is working.’

OBR analysis revealed that the freeze in income tax thresholds, which is due to last until 2028, will drag 3.2million low-paid workers into the tax system, while an extra 2.5million will be hit by the top 40p and 45p rates for the first time.

In a bigger-than-expected Budget statement, parents were promised 30 hours of free childcare a week for all pre-schoolers aged over nine months.

Fuel duty was frozen and a ‘temporary’ 5p a litre cut was extended for another year while average energy bills were frozen at £2,500 for another three months, saving a typical household £160.

The Ministry of Defence was granted an extra £11billion over five years, following warnings the Armed Forces have been ‘hollowed out’.

The improving economic picture allowed Mr Hunt to set out a £21billion-a-year package to boost growth. OBR director Richard Hughes said the scale of the spending meant the Chancellor faced a ‘white knuckle ride’ to meet his fiscal rules.

But he said their flexible nature could still leave him with ‘wriggle room’ to cut taxes ahead of the election.

Mr Hunt refused however to commit to cutting taxes before the election, saying he was ‘not interested in playing games’. Setting out a ‘Budget for growth’, he unveiled childcare reforms he said could ultimately help a million stay-at-home mothers return to work

The centrepiece of the ‘back-to-work’ announcement was an offer of 30 hours a week of free childcare to all children aged over nine months, saving families £6,500 a year and helping parents return to work.

READ MORE: Has Jeremy Hunt’s first Budget left YOU better or worse off? Use our interactive tool to discover if you’re among the winners or losers – as first-time buyers, entrepreneurs and pensioners weigh up its effects on them

Mr Hunt said the Treasury would aim to provide full wraparound care for primary school pupils by 2026, while the amount that parents on low income can claim was increased to £950 a month. The OBR predicted it would encourage 60,000 parents back to the workplace.

But Mr Hunt said he hoped that a million parents of young children might eventually decide to return to employment.

Childcare is due to be a major battleground at the next election, with Labour sources saying the party plans a ‘big bazooka’ offer on the issue.

Tory former chancellor Kenneth Clarke welcomed the ‘competent’ Budget, telling Sky News: ‘This Government is not going to be saved from electoral doom by gimmicks. The Government will be judged on whether it looks competent and whether in two years’ time people think things are getting better. If they can get there – and they have not got long – that would be a remarkable turnaround.’

Matthew Fell of the CBI business group welcomed the tax breaks, which he said would ‘keep the UK at the top table for attracting investment and put us on an essential path to a more productive economy’.

He added: ‘Boosting childcare provision is a big win for businesses struggling to recruit and retain, and parents balancing care and career needs.’ But Labour leader Keir Starmer described the measures as a ‘sticking plaster’ for an economy that ‘needed major surgery’.

Raising concerns over growth forecasts, Sir Keir added: ‘This is a failure you can measure not just in the figures but in the empty pockets of working people right across the country.

‘Thirteen years without wage growth, 13 years no better off, 13 years stuck in a doom loop of lower growth, higher taxes and broken public services.’

Childcare is due to be a major battleground at the next election, with Labour sources saying the party plans a ‘big bazooka’ offer on the issue

Tory former Cabinet minister Simon Clarke gave the Budget a ‘B+’ but criticised the Chancellor’s decision to press ahead with the corporation tax rise.

He told LBC Radio the tax burden wasn’t ‘a sustainable position’, adding: ‘It isn’t good for growth. And it is something which as a Government, we should be determined to address. That does mean making some different decisions.’

Mr Rees-Mogg said it was not good policy to raise corporation tax and ‘then sort of salami-slice it a bit with some capital allowances to pretend it’s not much of a rise’.

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