Budget 2023 at a glance – Key points from Jeremy Hunt’s speech

Watch Live: PMQs and Chancellor Jeremy Hunt delivers budget

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Resolute Chancellor Jeremy Hunt promised a brighter future for Britain after seeing off recession – declaring in his debut Budget that the stronger-than-expected economy is “proving the doubters wrong”. Resisting demands from within his own party for tax cuts, he insisted that the Government’s plan is “working” as he laid out an array of initiatives to put the UK back on the “right track”.

Mr Hunt, who later visited a nursery in south London, vowed to boost growth by encouraging mothers back into work with free childcare and unveiled pension reforms aimed at retaining top doctors plus tax breaks for businesses.

He outlined his plan for economic recovery, with inflation expected to more than halve while growth is tipped to hover around two per cent in the coming years.

There are still major hurdles looming as forecasters warn living standards face the biggest squeeze on record while the tax burden reaches another historic high.

Mr Hunt said that international experts believe the UK economy is on the right track but he insisted the Government remains vigilant and will “take whatever steps are necessary” for economic stability.

He declared to MPs in the Commons: “In the face of enormous challenges I report today on a British economy which is proving the doubters wrong.”

The Chancellor said that the Government’s priorities to halve inflation, to reduce debt and to get the economy growing will all be met, adding: “The declinists are wrong, and the optimists are right. We stick to the plan because the plan is working.”

Mr Hunt was later in confident mood as he told reporters that he was going to tell Tory MPs at the backbenchers’ 1922 Committee “about the way this is going to help them win an election. There is no path for us without a reputation for economic competence.”

He made use of a £25billion-a-year lift in public finances to announce major giveaways to help encourage people who are economically inactive back into jobs.

Working parents will be given 30 hours of free childcare for pre-school children once their maternity and paternity leave is over. The plan – to cost £5.2billion a year in 2027 – is expected to raise employment by 60,000 as it frees up parents to work again.

Mr Hunt said he hopes a rise in working women would mean an extra one million in the workforce.

The Chancellor also announced 15,000 high earners will benefit from the abolition of the £1million lifetime pensions allowance.

Labour leader Sir Keir Starmer criticised the move as a “huge giveaway to some of the very wealthiest” despite his health spokesman promising last year to do the same.

Mr Hunt also raised the annual pension allowance to £60,000 to try and stop the most experienced workers taking early retirement.

It follows a campaign by British Medical Association chiefs who said the “doctors’ tax” was forcing the most senior experts out of the profession since they were penalised every time they went to work once at the limit.

Among measures to cope with the cost-of-living crisis was extra energy support worth £160 a household while consumers who are struggling the most and are on a pre-payment meter will no longer pay a higher rate.

Mr Hunt’s Budget also freezes fuel duty for drivers and extends a one-off 5p cut by 12 months.

There was cheery news for the hospitality sector too – its draught products will be rated as up to 11p lower than the duty on drinks sold in supermarkets, from August. But the Chancellor ignored calls from Tories to freeze next month’s rise in corporation tax from 19 per cent to 25 per cent, claiming the UK’s rate is still competitive.

He axed a generous “super deduction” tax break for firms but brought in a “full expensing” scheme which means every pound invested in IT, plant or machinery can be claimed against tax. Mr Hunt had more room for manoeuvre after the Office for Budget Responsibility (OBR) forecast higher growth than anticipated.

Officials said the UK would avoid a predicted “technical recession” and inflation would plummet to 2.9 per cent by the end of the year.

The fiscal watchdog expects the economy to contract by 0.2 per cent this year but then increase by 1.8 per cent in 2024 – and by more than two per cent for at least the following two years.

It also said the UK remains on course for the sharpest recorded drop in living standards over the two years to the end of next March.While the drop looks to be lower than first thought, real disposable income per person will still tumble 5.7 per cent in the short term.

Households will feel the pinch more than at any point since 1957, according to the OBR – which also predicted house prices will fall by 10 per cent from their high in the last three months of 2022.

Mr Hunt said the economy was in a better position than expected due to higher tax receipts and falling global energy prices. Public sector borrowing is on track to hit £152.4billion for 2022/23 – almost £25billion less than forecast.

But the OBR said the Chancellor had given himself a buffer of just £6.5billion to meet his key target of having debt falling as a proportion of the size of the economy in five years. That falls to £2.8billion if he continues to freeze fuel duty.

Snap polling found half of voters broadly support the Budget while just one in five oppose it. Support was highest for extending energy bill help – backed by eight in ten people, the Savanta study reported.Matthew Fell, CBI interim director-general, said: “This Budget is a strong second act in the Chancellor’s plan for stability and growth. Measures to help households and businesses will secure the growth we need.”

Ranil Jayawardena MP, whose Conservative Growth Group called for changes to end the “doctor’s tax”, said: “We welcome the abolition of the lifetime allowance and the increase in the annual allowance, which will help our most qualified medics stay in the NHS.”

But Dennis Reed, of pressure group Silver Voices, said: “The Budget was a total non-event as far as older people are concerned. Senior citizens struggling to pay their bills and find social care will be sadly disappointed.”

While Shadow Chancellor Rachel Reeves said: “This Budget was a chance for the Government to unlock Britain’s promise. Instead they decided to continue papering over the cracks of 13 years of economic failure.

“The only surprise was a handout for the richest 1 per cent and their pension pots.”

Stealth taxes will hit nearly six million people over the next five years as the tax burden nears a fresh postwar record, the OBR said.

Freezes in thresholds on income tax and National Insurance since 2021 will raise £120billion, according to its analysis.

The watchdog found the measures will raise £29.3billion for the Government in the financial year ending 2028 – equivalent to a four per cent rise in the basic rate of income tax.

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