April 23, 2024
Economy

Did Jeremy Hunt’s last Budget do what it promised?


  • By Anthony Reuben
  • BBC Verify

Image source, UK Parliament/Andy Bailey

Chancellor Jeremy Hunt will set out his Budget on 6 March, almost a year after his first spring Budget.

In the 2023 Budget, he announced measures – including on growth, inflation and childcare – which were highlighted in a government press release.

How has the government got on with delivering them?

A Budget for growth

Mr Hunt introduced his speech on 15 March 2023 as “a Budget for growth”.

But, according to official figures, the economy has not grown since.

For the rest of 2023, there was zero growth followed by a 0.1% and a 0.3% contraction – meaning the UK economy entered recession.

Halving inflation

Mr Hunt highlighted a forecast from the Office for Budget Responsibility (OBR) that inflation would be halved by the end of 2023.

When he delivered his Budget, inflation was still above 10% and it did indeed halve, reaching 4% by the end of the year.

Help for pubs

The chancellor announced that from 1 August 2023 he was going to make Draught Relief more generous, describing pubs as a “treasured community institution”.

It applies to alcoholic drinks such as beer and cider that are below 8.5% ABV and can be served on draught.

The relief reduced the tax on them by 9.2%. Mr Hunt said: “we’re protecting the price of a pint”.

But beer prices have continued rising.

The Office for National Statistics (ONS) said they were up 7.5% in January 2024 compared with the same month last year, with prices increasing every month of the year, despite draught relief.

But that was still a smaller increase than beer from shops, which went up 8.6% in the same period.

Emma McClarkin, the British Beer and Pub Association’s chief executive said the cut in duty “has been a valuable boost to brewers and pubs” but called for further cuts to beer duty.

BBPA figures show that almost exactly the same number of pubs closed in the UK in the second half of 2023 (266) as had closed in the first half (265).

Image source, Getty Images

Free childcare

One of the biggest measures was free additional childcare.

From April 2024, eligible two-year-olds in England will be entitled to 15 hours a week of childcare during term time – more than 100,000 working parents have registered for this.

There have also been warnings of staff shortages.

BBC analysis estimated that demand is likely to rise by about 15% – equivalent to more than 100,000 additional children in full-time care once children as young as nine months are eligible in September 2025.

The think tank Nesta estimates that about 27,500 early-years professionals would be needed in England to meet this.

Total childcare staffing in England increased by almost 13,000 overall between 2022 and 2023.

That was driven by an increase in staff at private providers and in school-based nurseries. However, childminders and staff in voluntary groups are continuing to fall, with 5,600 fewer in 2023 than in 2022.

In February, the government launched a campaign to recruit more staff, but early-years charities said it would be too late to help.

Education Secretary Gillian Keegan has said she is confident that the extra childcare will be delivered from April.

Back to work

One of the ways that Mr Hunt said he was going to promote growth was by helping people back into work, including those not working due to disability or long-term sickness.

His measures included apprenticeships for over-50s, abolishing the lifetime pension allowance and sanctioning benefits claimants who choose not to take up a reasonable job offer.

He said: “excluding students, there are over seven million adults of working age who are not in work”.

We asked the Treasury about which figures he was quoting and were told it was the figures for December to January 2023, taking all the people who are not working and subtracting students, although that actually gives a figure closer to eight million.

The official figures show that figure has fallen slightly, but there have been changes to the data that mean they are not strictly comparable.

Prepayment meters

Mr Hunt also announced measures on energy bills including stopping people who use prepayment meters having to pay more for their energy than those paying by direct debit.

“The energy premium paid by our poorest households is coming to an end,” Mr Hunt said.

And he has done this, in two stages – initially he changed the Energy Price Guarantee to temporarily remove the difference.

Then in February 2024, the regulator Ofgem announced that from April it was removing the differences in standing charges that had previously been paid by those using prepayment meters.

Business investment

One of the big Budget 2023 announcements was “full expensing”, allowing companies to deduct the full amount they invest in equipment and machinery from their profits.

It means for every pound a company invests, its taxes are cut by up to 25p.

“Its impact on our economy will be huge,” Mr Hunt said, citing the OBR as saying it would increase business investment by 3% a year.

The policy came into force on 1 April 2023. The level of business investment for the whole of 2023 was 6.1% higher than it had been in 2022.

Karl Williams, research director at the Centre for Policy Studies (CPS) welcomed this increase, saying: “Business investment has been flat for years, contributing to weak economic growth.”

He said it was too soon to say what proportion of the increase was due to full expensing, but predicted that it would eventually increase it by about 1.5% a year.

We asked the Treasury to comment on the delivery of the 2023 Budget measures.

It said: “Our childcare reforms will save parents up to £6,500 on average, and because of our long-term decisions – including cutting taxes for 29 million people and an £11bn tax cut for business – we are forecast to permanently add 0.5% of output to the UK economy and increase the number of people in work by around 200,000.”

More coverage on the Budget 2024



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