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Spring Budget 2023: Jeremy Hunt announces changes to childcare, pensions and energy support
Find out how the Chancellor's announcements will affect you
The Chancellor said his Spring Budget was focused on growth and 'breaking down barriers', with the overall aim of getting people returning to work or remaining in the workforce.
Ahead of the speech, the Treasury released details about the government's continued energy support plans as the country continues to grapple through the cost of living crisis.
Here, Which? takes a closer look at what was included in Jeremy Hunt's 'Budget for growth', and how it will affect people's pockets.
Major expansion to childcare support
Parents were one of the biggest 'winners' in the Budget, as the Chancellor announced a major expansion of childcare support in a bid to help more parents return to work.
The government will expand 30 hours of funded childcare to begin from the time when maternity care ends at nine months, until starting school.
Currently, all children aged three and four are entitled to 15 hours of free childcare a week, or 30 hours if you or your partner are in work and earn at least the national minimum wage or living wage. However, neither parent can earn more than £100,000 a year to use the scheme.
Provision for two-year-olds is currently limited to 15 free hours a week for parents who claim certain benefits.
However, the reforms mean eligible households – where both adults work at least 16 hours a week – will receive 30 hours funded childcare from nine months old to four years old for 38 weeks a year.
There will be a phased introduction to ensure there is enough supply:
- April 2024 Working parents with children aged two and over will be given 15 free hours a week
- September 2024 The 15 hours will be extended to all children over nine months old, and will kick in from the moment maternity leave ends.
- September 2025 All eligible households with children under five will be given 30 hours free childcare.
The Chancellor also announced that families using the universal credit system for support with childcare costs will receive money upfront. Currently, parents have to make the payment and then claim a refund afterwards.
The childcare element of universal credit currently covers 85% of childcare costs, up to a maximum of £646.35 per month for one child, or £1,108.04 for two or more children.
Under Hunt's plans, this will rise to £951 per month for one child, and £1,630 for two or more children.
For school-age children, Hunt announced that schools and local authorities will be funded to increase the supply of wraparound care - provided before and after usual school hours. This will mean parents can drop their children at school between 8am-6pm, reducing the impact on their working hours.
Pension tax rule reforms
Jeremy Hunt set out plans to abolish the pension lifetime allowance in an effort to encourage older people to remain in work, or return to work.
You can save as much into your pension as you want, but the lifetime allowance was the most you could save without getting a hefty tax bill.
In 2022-23, the lifetime allowance remained at £1.073m and was due to be frozen until 2026. But now the lifetime allowance charge will be removed from 6 April before being fully abolished in a future finance bill.
Hunt also raised the amount you can save into a pension in a single year while still benefiting from tax relief from £40,000 to £60,000 in 2023-24. This is called the pensions annual allowance.
Another change that will kick in from 6 April is an increase to the money purchase annual allowance, which will go from £4,000 to £10,000. For those with a defined contribution (DC) pension who have already made a withdrawal, this is the amount you can save into a pension while benefiting from tax relief.
All changes are designed to encourage older workers to remain in the workforce, with Hunt giving a mention to NHS doctors. However, the group who'll benefit from these changes remains a minority compared with the UK workforce as a whole.
- Find out more: reforms to pension tax rules set to give savers a boost
Energy price cap extended
Jeremy Hunt delayed the planned rise to the Energy Price Guarantee (EPG), meaning it will stay at its current level for a further three months.
The EPG caps the unit prices that domestic customers pay for their energy at rates lower than the energy regulator Ofgem's price cap. The government makes up the difference with your energy provider. The EPG does not affect standing charges, which are determined by Ofgem.
The EPG will remain at £2,500 until the end of June, with a 'typical home' saving £160 on energy bills as a result, according to the Treasury. It had been set to increase to £3,000.
The U-turn, which was announced ahead of Hunt's Budget speech, came after weeks of mounting pressure from consumer groups and charities concerned that the additional costs would push many households already in financial distress over the edge.
It's likely that the next time Ofgem changes its prices – from 1 July – they will drop lower than the current EPG rates, so households will see a small energy price drop.
However, the government's Energy Bill Support Scheme, which has meant most households receive an additional £67 a month towards their energy bills since October 2022, will still end at the end of this month. This means that, in real terms, households will still find April's monthly bill more expensive.
Hunt also announced that households on prepayment meters will have their charges brought 'in line with comparable direct debit charges'. The EPG will be adjusted from 1 July to remove the premium charged to prepayment customers.
In addition, a £63m fund was announced to support public leisure centres with swimming pools, which have seen sharp rises in energy costs over the last year. Around £40m will go towards making pools more energy efficient in the long term, and £20m to help leisure centres deal with rising costs.
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Listen nowWelfare reforms
Hunt also announced a major set of reforms to support people into work and to ‘remove barriers’ that stop those on benefits, those with health conditions and older workers from working.
This included the publication of a White Paper on disability benefits reform, which would see the biggest change to the welfare system in a decade.
It proposes scrapping the work capability assessment, which means the majority of claimants will only have to do one health assessment, rather than two. Hunt said these reforms will support claimants who want to work without fear of losing their financial support.
He also said universal credit sanctions will be applied ‘more rigorously’ to those who fail to meet strict work-search requirements and choose not to take up a job offer.
He also announced:
- The launch of Universal Support A voluntary employment scheme for disabled people, where £4,000 per person will be spent to help them to find appropriate jobs.
- Administrative Earnings Threshold This will be increased from the equivalent of 15 hours to 18 hours at National Living Wage, meaning anyone that works below this level will receive more work coach support.
- Midlife MOT This is being expanded and improved to help people get the best financial, health and career guidance ahead of retirement.
- 'Returnerships' Apprenticeships targeted at the over-50s who want to retrain, which will refine existing skills programmes to make them more accessible to older workers.
Fuel duty
The planned increase of 11p in fuel duty this year will be cancelled, and rates will be kept the same for another year.
Fuel duty was first cut by 5p per litre in last year's Spring Statement, and it will now remain frozen for another 12 months, saving the average driver £100.
- Find out more: how to save money on fuel
Cheaper pints at the pub
The duty on average-strength draught beer sold in pubs and restaurants across the UK will be frozen under the 'Brexit Pubs Guarantee'.
This draught relief means duty paid on pints in pubs will be 11p less than the duty in supermarkets. However, alcohol duties are going up by 10.1% in August – in line with inflation.
The government is also reforming duties based on a drink's alcoholic strength, which could be bad news for those who prefer a glass of wine, as wine faces the biggest duty increase in more than 50 years, averaging an extra 44p per bottle.
Additionally, tobacco duty will rise by RPI plus 2%, which could add around £1.75 to the price of a pack of cigarettes.
Fixing potholes
Hunt announced that the government would allocate an additional £200m for local road maintenance in England.
This increase will enable local authorities in England to fix more potholes, complete resurfacing, and invest in major repairs and renewals, such as keeping bridges and major structures open.
Will the UK enter a recession this year?
The Chancellor used his Budget speech to announce that the Office for Budget Responsibility (OBR) now does not believe the UK will enter a 'technical recession' later this year.
He said this was due to 'changing international factors' and preventative measures from the government.
