In his first Budget as Chancellor, Jeremy Hunt dispelled declinists as he unveiled plans for a healthy and growing economy. With emphasis on the cost of living, yesterday’s announcement set out measures to tackle two major barriers that stop businesses growing – investment incentives and labour supply.
1. The UK should swerve a recession
During the announcement, Jeremy Hunt drew on optimistic forecasts from the Office of Budget Responsibility (OBR), showing the country will narrowly avoid entering a recession this year. We were also reminded of the government’s number one priority to halve inflation, and according to Hunt, measures are already working to achieve this goal. The OBR forecast predicts a fall in inflation from 10.7% in Q4 2022 to 2.9% by end of 2023.
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2. Pensions get a welcomed boost
In a bid to get the over-50s back to work, Hunt revealed plans to increase the yearly tax-free allowance for pensions from £40,000 to £60,000.
Rumours around the lifetime allowance rising from its current level of £1.07m were squashed with an announcement to abolish it entirely. Going one further and eliminating the lifetime allowance means that pensions will stay tax-free regardless of how much they increase. This will reward individuals who have worked hard to save for their retirement.
3. New investment zones are revealed
To “drive business investment and level up” the country, the government has introduced 12 new low-tax investment zones. In this growth initiative, the government plans to provide funding to areas that need it the most, improving jobs, services, and opportunities for communities. Each zone is set to receive £80m over five years for various development projects.
The English zones include: the East Midlands; Greater Manchester; Liverpool; the North East; South Yorkshire; the Tees Valley; the West Midlands; and West Yorkshire.
4. Households are given extra energy support
Millions of households have been struggling with extraordinarily high energy costs, having a knock-on effect on the health of our economy.
To tackle this, Hunt confirmed that the Energy Price Guarantee will be extended at its current level of £2,500 for a further three months, from April to June. Giving people this financial relief until the price of energy drops should encourage consumer spending and help get the economy moving.
5. Childcare changes to help parents thrive
The Chancellor also addressed the need to support parents – especially mothers – in their careers. As part of the back to work policy, parents with children from the age of nine months will soon be able to receive up to 30 hours a week of free childcare.
For parents unable to pay the rising childcare costs, this incentive will be a gamechanger. Parents will be able to continue working and contributing to healthy economic growth.