Expanding child care provision and boosting employment are key elements of the UK's new budget announced on Wednesday.
ADVERTISEMENTThe UK treasury unveiled its latest budget on Wednesday afternoon aimed at encouraging thousands of Britons back to work in the face of labour shortages and a cost-of-living crisis. The announcement came as half a million workers join the strike, including civil servants, teachers, junior doctors and transport workers.
Key announcements
Chancellor Jeremy Hunt announced that the cap on how much workers can accumulate in pensions savings before extra tax will be abolished and that the tax-free yearly allowance for pension pots will rise from £40,000 to £60,000.
Measures to encourage parents back to work were also announced; the 30 hours of free childcare for working parents in England is set to be expanded to cover one and two-year-olds.
Both these measures are aimed at reducing the UK's inactivity rate which, at 21.3% according to the latest figures, remains higher than before the pandemic and is weighing on the economy. The Chancellor hopes that the announcements will encourage older workers to stay in the workforce before retiring while helping parents struggling with high childcare costs.
In the face of rising costs, fuel duty will be frozen, with the 5p cut to fuel duty on petrol and diesel, due to end in April, being maintained for another year.
Alcohol taxes will rise in line with inflation from August and tax on tobacco will increase by 2% above inflation, and 6% above inflation for hand-rolling tobacco.
Addressing energy crisis challenges
In response to urgent appeals for more help to deal with soaring energy prices, the UK government made an early announcement on Wednesday morning revealing plans to extend the energy price cap for households by three months.
The measure, which will cost the Treasury €4.5 billion, should save the average British household more than €180, the government said.
However, Britons will see the end of another €450 per household energy payment in April, which had been staggered between October and March.
From 1 July the "prepayment penalty" for customers using prepayment meters instead of paying for energy via direct debit will end, cutting bills for over four million households.
Office for Budget Responsibility
On Wednesday the Office for Budget Responsibility (OBR), the government's budget forecasting body, predicted that the UK will avoid recession in 2023, but the economy will shrink by 0.2%.
The independent body also predicts that the UK's inflation rate will fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022.
Underlying debt is forecast to be 92.4% of GDP this year, rising to 93.7% in 2024.
The UK avoided recession at the end of 2022 and growth rebounded to 0.3% in January in the country. In addition, London has borrowed £30 billion (€34 billion) less than expected on a cumulative basis in the current fiscal year.
Strikes grip the UK
Hundreds of thousands of teachers, doctors and London Underground drivers have staged mass walkouts to coincide with the budget announcement in one of the biggest days of industrial action in the country for months.
Strikers are angry that public sector workers have borne the brunt of the budget austerity implemented by Hunt’s Conservative Party after it took power in 2010 following the global financial crisis.
The British Medical Association, which represents the fully qualified physicians known in the UK as “junior doctors,” says first-year doctors have seen their pay fall by 26% over the past 15 years after accounting for inflation.
ADVERTISEMENTConsumer prices rose 10.1% in the year through January, the fifth consecutive month of double-digit increases. To combat inflation, the Bank of England has approved 10 interest rate increases over the past 15 months, raising the cost of mortgages, and consumer and business loans.