Assessing the Impact of Chancellor Jeremy Hunt’s 2023 Budget Measures
Chancellor Jeremy Hunt presented his Budget on March 6th, 2023, outlining various measures aimed at promoting growth, tackling inflation, and providing support in areas such as childcare and energy bills. However, a year later, it is essential to assess the impact of these measures and determine whether they have been successful in achieving their intended goals.
A Budget for Growth?
Mr. Hunt introduced his speech as “a Budget for growth,” but official figures indicate that the economy has not experienced any growth since then. In fact, the UK economy entered a recession, with zero growth followed by contractions of 0.1% and 0.3% throughout the rest of 2023.
Halving Inflation
One of the key highlights of the Budget was the forecast from the Office for Budget Responsibility (OBR) that inflation would be halved by the end of 2023. While inflation was still above 10% when the Budget was delivered, it did eventually halve, reaching 4% by the end of the year.
Help for Pubs
In an effort to support pubs, Chancellor Hunt announced Draught Relief, which reduced the tax on alcoholic drinks such as beer and cider served on draught by 9.2%. However, despite this relief, beer prices continued to rise. The Office for National Statistics (ONS) reported a 7.5% increase in beer prices in January 2024 compared to the same month the previous year. Nonetheless, this increase was lower than the 8.6% rise in beer prices from shops during the same period. The British Beer and Pub Association’s chief executive, Emma McClarkin, acknowledged that the duty cut had been beneficial but called for further reductions in beer duty.
Free Childcare
One of the most significant measures introduced in the Budget was free additional childcare. Starting from April 2024, eligible two-year-olds in England would be entitled to 15 hours a week of childcare during term time. Over 100,000 working parents have already registered for this benefit. The scheme will be extended to parents of children aged nine months to two years in September 2024 and then increased to 30 hours a week in September 2025.
However, concerns have been raised regarding technical glitches and potential delays in accessing the scheme. Additionally, there are warnings of staff shortages. BBC analysis estimates that demand for childcare is expected to rise by about 15% once children as young as nine months become eligible in September 2025. To meet this demand, approximately 27,500 early-years professionals would be needed in England. While overall childcare staffing increased by almost 13,000 between 2022 and 2023, there has been a decline in childminders and staff in voluntary groups.
Back to Work
Mr. Hunt aimed to promote growth by helping people back into work, including those not working due to disability or long-term sickness. Measures included apprenticeships for over-50s, abolishing the lifetime pension allowance, and sanctioning benefits claimants who refuse reasonable job offers. However, the figures quoted by Mr. Hunt regarding the number of adults not in work were contested. The official figures show a slight decrease, but changes in data make them not strictly comparable.
Prepayment Meters
The Chancellor also addressed energy bills, particularly for those using prepayment meters. Mr. Hunt announced measures to ensure that people using prepayment meters would not have to pay more for their energy than those paying by direct debit. This was achieved through changes to the Energy Price Guarantee and the removal of differences in standing charges paid by prepayment meter users.
Business Investment
One of the significant announcements in the Budget was “full expensing,” allowing companies to deduct the full amount they invest in equipment and machinery from their profits. This policy, which came into effect on April 1st, 2023, aimed to increase business investment by 3% per year, according to the OBR. The level of business investment for the whole of 2023 was 6.1% higher than in 2022. While it is too soon to determine the exact impact of full expensing, experts predict that it could eventually increase business investment by about 1.5% per year.
Assessing the Delivery
When asked about the delivery of the 2023 Budget measures, the Treasury highlighted the potential savings for parents through childcare reforms and the long-term decisions that would add 0.5% of output to the UK economy and increase employment by around 200,000 people. However, it is crucial to continue monitoring the implementation and effectiveness of these measures to ensure their success.
In conclusion, Chancellor Jeremy Hunt’s 2023 Budget measures have had mixed results thus far. While some goals, such as halving inflation and implementing free childcare, have been partially achieved, others, like promoting economic growth and reducing beer