Report by Joel Hills, ITV News Business Editor
Jeremy Hunt has defended his "transformational" Budget to get people back to work amid concerns he is handing a massive £1 billion tax giveaway to the some of the wealthiest in the country.
The chancellor used a £25 billion-a-year improvement in the public finances to dramatically expand access to childcare and offer tax breaks to businesses and wealthy pensioners. Mr Hunt said his raft of financial changes will make the UK "one of the most prosperous in the world" while also "harnessing British ingenuity to make us a science and tech superpower".
Despite the tax-break for wealthy pensioners, the chancellor admitted on Thursday morning that the "burden of tax will be higher" for many households across the country.
He insisted that, despite many being worse off in terms of things like income tax, it was the right thing to do to help people get through a difficult patch.
Asked if households will just have to accept that life is going to get even harder at a rate of 6% worse off, he told the BBC: "The choice I make is to help those families," pointing out the extension of energy bill support and freezing fuel duty.
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Opening his Budget statement on Wednesday, Mr Hunt said the UK economy was "proving the doubters wrong" and with “stability and sound money” Britain will avoid a technical recession this year.
But Labour leader Sir Keir Starmer said the chancellor was "dressing up stagnation as stability", claiming the Budget put the country "on a path of managed decline".
Shadow Chancellor Rachel Reeves announced on Thursday that the Labour Party will seek to force a Commons vote next week on the decision to scrap the £1.07 million lifetime pensions allowance.
With the Tories suffering heavily in the polls the chancellor refused to commit to cutting taxes for before the next election.
He told ITV’s Peston show: "My job is to do the right thing for the economy and then people will see that they can trust the Conservatives to get the economy growing. That’s the electoral dividend – I’m not interested in playing games."
Inflation, which is hitting struggling households hard during the cost-of-living crisis, is expected to plummet from 10.7% last year to 2.9% by the end of the year, according to the Office for Budget Responsibility (OBR).
"Inflation destroys the value of hard-earned pay, deters investment and foments industrial strife," Mr Hunt said, adding that he "remains steadfast" in the government's bid to bring it back down to the 2% target.
But Living standards are still expected to fall by the largest amount since records began, although the decline is not as bad as had been forecast in November.
The OBR said real household disposable income (RHDI) per person is expected to fall by a cumulative 5.7 per cent over the two financial years 2022-23 and 2023-24.
"While this is 1.4 percentage points less than forecast in November, it would still be the largest two-year fall since records began in 1956-57," the OBR said.
Energy price guarantee
The Budget announcement which affects the most people is a commitment to extend the energy price guarantee from April to June.
It means average household energy bills will be capped at £2,500 for another three months, rather than increase to £3,000 in April as had been expected.
ITV News Correspondent Sarah Corker looks at how the budget will impact people
“High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level," Mr Hunt said.
“With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”
He said this measure "will save the average family a further £160 on top of the energy support measures already announced".
Free childcare extension
Parents of one and two-year-olds in England will get 30 hours of free childcare a week, in order to encourage them back to work. They will be required to work at least 16 hours to get this support.
Previously there has been no support for parents after their period of parental leave ends following birth, until free nursery hours are offered for three and four-year-olds.
That lack of support has been blamed for young parents choosing not to work, rather than forking out for expensive childcare.
Mr Hunt said this package reduces childcare costs by nearly 60% and will be worth on average £6,500 every year for a family with a two-year-old child using 35 hours of childcare every week.
But he said he'd have to introduce the support in stages to ensure there is enough supply in the market.
And to help nurseries, staff-to-child ratios will change from 1:4 to 1:5 for two-year-olds in England but that will be "optional".
He added that parents who are moving into work or want to increase their hours, will receive their childcare costs upfront, rather than as a reimbursement which was previously the case.
The the maximum they can claim will increase to £951 for one child and £1,630 for two children, an increase of almost 50%.
Mr Hunt abolished the limit people can save in their pension pot without paying tax, in a bid to reverse a growing trend of high earners taking early retirement.
Previously people could only £1,073,100 without paying tax but that figure is now unlimited.
The change to Pensions Lifetime Allowances is designed in particular to bring encourage senior doctors and consultants to remain in the NHS and to bring back those who have left.
He claimed it "will stop over 80% of NHS doctors from receiving a tax charge incentivise our most experienced and productive workers to stay in work for longer and simplify our tax system, taking thousands of people out of the complexity of pension tax".
But Labour attacked the move, labelling them as a "permanent tax cut" for the wealthy.
Sir Keir said it was "a huge giveaway to some of the very wealthiest", given the previous lifetime allowance only impacted those with pensions over £1 million.
"The only permanent tax cut in the budget is for the richest 1%. How can that possibly be a priority for this government?" he said.
The chancellor did not deny this in a broadcast interview following the Budget.
Asked whether it was a budget for the rich, Mr Hunt said: "Of course we want to help older people who want to stay in work and by definition they will generally be on higher salaries."
Help getting disabled and injured people into work
The chancellor said he would introduce a voluntary scheme to help disabled people work, if they want to.
The government will spend up to £4,000 per person to help them find appropriate jobs and put in place the support they need. It will fund 50,000 places every single year.
He said he would separate benefit entitlement from an individual's ability to work.
"As a result, disabled benefit claimants will always be able to seek work without fear of losing financial support."
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And those with injuries with also get support to carry on working before they are forced to quit.
The chancellor said a £400m plan to increase the availability of mental health and musculoskeletal resources and expand the Individual Placement and Support scheme will help.
Beer and fuel duty changes
He's introduced a "Brexit pubs guarantee" which will see duty on draught products in pubs 11p lower than in supermarkets from August, and frozen fuel duty for the next year.
"British ale may be warm, but the duty on a pint is frozen," he told MPs.
And on fuel duty, he said his move to maintain the 5p cut and freeze fuel duty will save the "average driver £100 next year and around #200 since the 5p cut was introduced."
But the director of the Institute of Fiscal Studies said these commitments leave questions hanging over claims the government could not afford to pay striking public sector workers more.
He said: "Recall that the government has spent months saying it can't find any money to prevent nurses and teachers getting very big pay cuts. He just found £6 billion to cut fuel duties. That's a choice."
Support for businesses
In a bid to help businesses, Mr Hunt said he would introduce a three-year policy of "full expensing" for businesses will mean every pound a company invests in IT equipment, plant or machinery can be deducted "in full and immediately" from taxable profits.
He said that move would be worth £9 billion a year.
Mr Hunt also said he wants to help businesses in the life science and creative industry sectors, by allowing them to claim a credit worth £27 for every £100 they spend on research and development.
Some people on Universal Credit will be forced to work more or engage with government employment coaches.
He announced sanctions reforms aimed at getting people on Universal Credit benefits into work.
He said: "There are more than two million jobseekers in this group, more than enough to fill every single vacancy in the economy."
"For those working low hours, we will increase the Administrative Earnings Threshold from the equivalent of 15 hours to 18 hours at National Living Wage for an individual claimant, meaning that anyone working below this level will receive more work coach support alongside a more intensive conditionality regime."
Mr Hunt added: "Sanctions will be applied more rigorously to those who fail to meet strict work-search requirements or choose not to take up a reasonable job offer.
What didn't the Budget include?
There was no mention of an increase to the pay of public sector workers, an issue which has led to months of disrupting strikes.
Paul Johnson, the director of the Institute for Fiscal Studies also highlighted that the Budget contained "nothing on the big tax rises that are coming in for most of us in April".
The housing crisis, which has seen private rent fees rising by up to 15% over the last year, was also not mentioned in the Budget.
The charity Shelter said: "Homelessness has almost doubled in the last 10 years and yet again we have a Budget that does nothing to help struggling renters who are drowning in debt and rapidly rising rents. It is outrageous that the government has chosen to keep housing benefit frozen at 2020 levels when its own figures show rents have risen by more than 8% in this time."
Jeremy Hunt bids for growth
The chancellor is hoping to boost growth after a period of stagnation in the UK economy, which began with the 2008 financial crash and made worse by Brexit and coronavirus.
Thousands of people left the workforce after the pandemic, particularly younger parents and those taking early retirement, but changes to childcare and pensions are designed to bring them back.
Watch his statement in full, along with ITV's special Budget programme:
Mr Hunt said his Budget is "not just growth from emerging out of a downturn" but to boost the economy in order to pay for improvements to the NHS and schools.
In a nutshell, the chancellor claimed his Budget will remove obstacles to businesses investing, tackle labour shortages and break down barriers which prevent people working.
His opposite number, shadow chancellor Rachel Reeves, said Labour would also be focusing on growth after "13 years of economic mismanagement and sticking plaster politics leaving us lagging behind".
But she said her plan to create jobs and boost productivity growth would focus on "every part of our country, so everyone, not just a few feel better off".
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