Spring Budget: Personal Changes
"The biggest ever employment package. For disabled people, more help. For older people, barriers removed. For families feeling the pinch: fuel duty, frozen beer duty cut, energy bills capped."
Jeremy Hunt
Back to work
The number of 16 to 64-year-olds in employment has failed to return to pre-pandemic levels, with 8.86m “economically inactive” people not currently seeking paid work.
Meanwhile, the number of job vacancies remains high at 1.1m – 328,000 more compared to early 2020 – meaning that fewer people are working and paying taxes than there could be.
To increase worker participation, Hunt announced his plan to “remove the barriers” to work for groups including older workers, parents and people with health conditions, causing many to dub the announcement as a ‘back to work’ Budget.
Pensions lifetime allowance
In the run-up to the Budget, many speculated that Hunt would increase the pensions lifetime allowance (LTA) to allow people to increase the amount they receive in retirement.
Instead, he scrapped the limit altogether, claiming this would incentivise over-50s to work for longer.
The LTA is the total amount you can put in your private pension pot before tax. The cap was due to stay at £1,073,100 until 2026, but workers will now be able to make unlimited pension contributions during their lifetime.
Meanwhile, the annual allowance – the maximum tax-free amount people can pay into private pensions per year – will rise by 50% from £40,000 to £60,000.
According to the British Medical Association, the current LTA rate is “punitive”, and encourages senior doctors to leave the NHS.
Hunt hopes that abolishing the LTA and raising the annual allowance will address doctors’ concerns, as well as encourage older workers across the UK to return to the workforce.
However, some believe that these measures will only benefit top earners.
Expansion of free childcare
The Chancellor also announced significant reforms to childcare to encourage parents to return to work.
Working parents of children aged three to four are currently entitled to 15 hours of free childcare a week, or 30 if both parents are in work and earn at least the national minimum wage. However, the same support is not available for parents earning more than £100,000 a year in combined income.
The Government will expand this support to working parents of children over the age of nine months by September 2025.
Childcare in the UK is among the most expensive in the world, with average full-time nursery fees for a child under two standing at nearly £15,000 a year.
According to the Treasury, increased access to free childcare will reduce discrimination against women, who disproportionately take on care responsibilities, and “benefit the wider economy”.
However, the phased nature of these reforms means they will not come into effect until April 2024 at the earliest, so many parents of young children will not benefit.
The Chancellor also pledged more “wrap-around” care for working parents, bookending school days to allow parents to work longer hours without incurring costly childcare bills.
Returnerships
Hunt will also launch a ‘returnerships’ programme that will offer skills training tailored for the over-50s, taking previous experience into account.
The Government will add a further 8,000 places per year (an increase of 14%) to its ‘skills bootcamps’, which reskill people in sectors such as construction and technology.
Energy support
Following pressure to provide extra support for households struggling with soaring energy bills, the Chancellor announced a three-month extension of the energy price guarantee.
At the moment, the scheme caps the average household’s energy bills at £2,500 a year. This limit was due to rise to £3,000 from April 2023 onwards.
However, Hunt’s announcement means energy bill support will continue at the same levels until the end of June.
Despite previously saying there was “no headroom” for increased energy support, Hunt said: “With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.
Customers on prepayment metres will see energy charges brought into line with prices for customers who pay via direct debit. However, the £400 discount from the Energy Bills Support Scheme will end as planned.