Spring Budget: Jeremy Hunt says UK economy will avoid recession
Chancellor Jeremy Hunt has said the UK is not entering a "technical recession" as he delivered his Spring Budget to MPs in the House of Commons on Wednesday.
Hunt said the Spring Budget comes at a time when the British economy is "on the right track" and is "proving the doubters wrong", with 10-year gilt rates falling since mid-October, debt servicing costs coming down and lower mortgage rates.
"Today the Office for Budget Responsibility forecast that because of changing international factors and the measures I take, the UK will not now enter a technical recession this year," 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."
The Spring Budget marks a major moment for the government, which is currently trailing behind Labour by 15 points, to prove it can kickstart the economy after a disastrous end to 2022 that saw household costs soar and major holes in the labour market.
A major overhaul of childcare support in England, easing of restrictions on how much pension people can save tax free, an extension of the Energy Price Guarantee and changes to pre-paid energy rates to help the poorest were all included in the statement.
Hunt confirmed expected changes to support with domestic energy bills will be extended to the end of June, with prices for the average household remaining capped at £2,500 per year.
"After listening to representations from Martin Lewis and other experts, I today confirm that the Energy Price Guarantee will remain at £2,500 for the next three months," he said.
The £2,500 cap for the typical household will remain in place when energy prices remain high, ahead of an expected fall in prices from July.
The Chancellor said the measure will save the average family a further £160 on top of the energy support measures already announced.
The Spring Budget at a glance:
- Energy price guarantee extended to July and prepayment meter rates lowered
- Fuel duty frozen
- Tobacco rates up and 'Brexit pubs guarantee' that will ensure the duty on draught beer in pubs will be up to 11p lower than duty on booze in supermarkets
- £30m pledged for supporting veterans
- 12 investment zones confirmed, one of which will be in Scotland
- £11bn added to defence budget over the next five years, to be nearly 2.25 per cent of GDP by 2025
Among other energy bill support measures, Hunt confirmed that prepayment meter charges will be brought in line with comparable direct debit charges, as it is often the poorest households who pay more than other customers for energy via prepayment meters.
Ofgem has already agreed with suppliers a temporary suspension to forced installations of prepayment meters.
"Under a Conservative government, the energy premium paid by our poorest households is coming to an end," Hunt said.
Hunt is paying particular attention to tackling workforce shortages, with a number of measures to address the issue, including an overhaul of Universal Credit, and incentives for over-50s to come out of retirement, announced ahead of time.
Major changes to the childcare system to extend the allowance of 30 hours a week free childcare to one and two year old children were announced. While this will only apply to England, the Scottish Conservatives have already urged the Scottish Government to follow suit.
Changes to Universal Credit have already been announced to help parents and guardians with childcare costs by allowing them to receive support for childcare up front, rather than in arrears.
More Spring Budget at a glance:
- Pension lifetime allowance dropped
- Pensions yearly tax allowance raised from £40k to £60k
- £20bn for carbon capture over 20 years
- Research and development funding boost
- Great British Nuclear launched to drive down cost of nuclear power
Addressing calls from major businesses in an attempt to boost growth, Hunt announced that corporation tax will increase as planned from 19 per cent to 25 per cent from April, a contentious policy among many of his Conservative colleagues who believe the rate should be cut.
Labour leader Keir Starmer responded to Hunt's Budget statement by accusing the Conservative government of "running down public services" and refusing to implement a "proper windfall tax" on energy companies.
"British people see their tax burden at the highest level for 70 years," Starmer said.
"And they know it's not the government 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 a government of gimmicks making them pay while trying to claim the credit."
The Labour leader also said the government lacked "real ambition" on industrial strategy, clean energy, and housebuilding.
An extra £320m will flow through to the Scottish Budget for 2023-24 and 2024-25 as a result of extra spending in England. The UK Government will also provide £8.6m for the Edinburgh Festivals.
Deputy First Minister John Swinney said the budget was a “missed opportunity” and did not provide vital lifelines for the poorest households.
He said: “The UK Government should have taken more substantive action to increase the Scottish Government’s budget so we can better align spending and deliver for people and organisations right across Scotland.”
While welcoming the continuation of the energy price guarantee, Swinney said household bills will still rise, while interest rates mean there will be “a larger fall in living standards this coming year than… over the last 12 months”.
He added: “The limited additional money for the Scottish Government’s Budget is welcome but will not go far enough and in the long-term our capital funding will fall in real terms. Without extra funding, we will have to find money from within the Scottish Budget to invest in public services, provide fair pay rises and help people with the cost of living.
“The Scottish Government is doing what it can with its limited powers to ensure people receive the help they need, but the UK Government could have done far more to ease the burden affecting so many, demonstrating yet again why Scotland needs the powers of independence.”
Scottish Conservative finance spokesperson Liz Smith said: “Jeremy Hunt has delivered a budget for growth and stability which is great news for hard-pressed Scottish families... SNP ministers must pass on the Barnett Consequentials the budget has generated, so that Scots enjoy the full benefits of it.”
The Scotch Whisky Association said the budget was a “historic blow” to the sector, though, as the Chancellor rose the duty on whisky by 10.1 per cent.
SWA chief executive Mark Kent said: “We have been clear with the UK Government that increasing duty would be the wrong decision at the wrong time, so it is deeply disappointing that one of Scotland’s largest and longest-standing industries has been treated in this way.
“The industry continues to grapple with significant domestic headwinds, including the soaring cost of energy, intense pressure on the hospitality sector, and increasing regulatory burdens like the Deposit Return Scheme.
“This tax hike just adds to the pressures on the sector and breaks the UK government’s commitment to support Scotch.”