Budget 2023: Jeremy Hunt’s ‘growth’ plan may embrace childcare and over 50s but hike in corporation tax stays
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Chancellor Jeremy Hunt delivered what he claimed was a growth-focused budget centred on childcare reform, pensions and business investment, but the six per cent hike in corporation tax will remain.
He unveiled what amounted to a universal childcare policy; abolished the lifetime allowance on tax-free pensions savings; and announced tax breaks for firms investing in research and development (R&D).
Speaking in the House of Commons this lunchtime, Hunt told MPs the UK would not enter a technical recession this year, as previously forecast by the OBR, and said the government was meeting both its fiscal rules.
He said: “They forecast we will meet the prime minister’s priorities to halve inflation, reduce debt and get the economy growing. We are following the plan and the plan is working.”
Going further than expected, Hunt announced 30 hours of free childcare for all under-fives, from the moment maternity pay ends, for all eligible households where adults are working at least 16 hours a week.
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The plan will be introduced in stages, he said, with the full package rolled out from September 2025.
Lifetime allowance limits on pensions were abolished altogether, in a move aimed at preventing senior NHS clinicians from leaving the workforce to avoid losing out on cash.
“No one should be pushed out of the workforce for tax reasons,” Hunt said.
The annual pensions tax-free allowance will rise by 50 per cent from £40,000 to £60,000 – and rather than scrap the £1m lifetime limit, Hunt ditched it entirely.
Resisting calls to scrap the increase on corporation tax to 25 per cent is set to rile bitterly opposed rightwing Tories who consider the move a stifling of growth ambitions.
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But in a bid to sweeten the pill, he outlined measures to replace super-deduction tax relief with a “full expensing” policy set to last three years and hoped to be made permanent.
Firms investing in IT equipment, plant or machinery can deduct “every single pound” in full and immediately from taxable profits, which Hunt said was a tax cut worth an annual £9bn.
Throwing it across the aisle, Hunt hit out at Labour, saying: “I understand the party opposite is reviewing business taxes. Let me save them the bother. They put them up, we cut them.”
Responding to Hunt’s speech, Labour leader SIr Keir Starmer said the budget was “dressing up stagnation as stability”, and claimed it put the country “on a path of managed decline”.
He told MPs: “Again we see a failure to grip the long-term challenges.
“No determination to create growth that unlocks the potential of the many – working people being made to pay for Tory choices and Tory mistakes.”
The Labour leader said Chancellor Jeremy Hunt’s “boasts” about lower inflation were “ridiculous”, adding: “The idea that it’s a tax cut, British people can see through that.
“They see their tax burden at its highest level for 70 years and they know it’s not the government that’s lowering inflation, it’s working people, earning less, enjoying less.
“It’s their sacrifice that is helping to bring inflation down; and they deserve better than another cheap trick from the government of gimmicks, making them pay whilst trying to claim the credit.”