Budget 2023: living standards to fall by 6% and inflation to outstrip income growth say OBR

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The Chancellor of the Exchequer has delivered his first ever Spring Budget in the House of Commons on Wednesday afternoon.

Amongst the major announcements was an expansion to free childcare.

Budget 2023: OBR project inflation to come down to 2.9% by end of year

Key Events

  • OBR project inflation to come down to 2.9% by end of year
  • ‘Dressing up stagnation as stability’ says Labour leader Keir Starmer
  • Pension Lifetime Allowance abolished
  • Energy Price Guarantee extended until end of June

Free childcare expansion for children under five years-old

Chancellor, Jeremy Hunt, has announced a major change to free childcare provision. The details include 30 hours of free childcare for children under the age of five years-old from the moment maternity care ends.

Mr. Hunt told MPs: “I today announce that in eligible households where all adults are working at least 16 hours, we will introduce 30 hours of free childcare not just for three- and four-year-olds, but for every single child over the age of nine months.

“The 30 hours offer will now start from the moment maternity or paternity leave ends. It’s a package worth on average £6,500 every year for a family with a two-year-old child using 35 hours of childcare every week and reduces their childcare costs by nearly 60%. Because it is such a large reform, we will introduce it in stages to ensure there is enough supply in the market.

“Working parents of two-year-olds will be able to access 15 hours of free care from April 2024, helping around half a million parents.

“From September 2024, that 15 hours will be extended to all children from 9 months up, meaning a total of nearly one million parents will be eligible. And from September 2025 every single working parent of under 5s will have access to 30 hours free childcare per week.”

UK Chancellor Jeremy Hunt leaves Downing Street with the despatch box after presenting his spring budget to parliament on March 15, 2023 in London, England. Highlights of the 2023 budget are an increase in the tax-free allowance for pensions which the Chancellor hopes will stem the number of people taking retirement, a package of help for swimming pools affected by the increase in energy bills and changes to childcare support for parents on universal credit. (Photo by Carl Court/Getty Images)UK Chancellor Jeremy Hunt leaves Downing Street with the despatch box after presenting his spring budget to parliament on March 15, 2023 in London, England. Highlights of the 2023 budget are an increase in the tax-free allowance for pensions which the Chancellor hopes will stem the number of people taking retirement, a package of help for swimming pools affected by the increase in energy bills and changes to childcare support for parents on universal credit. (Photo by Carl Court/Getty Images)
UK Chancellor Jeremy Hunt leaves Downing Street with the despatch box after presenting his spring budget to parliament on March 15, 2023 in London, England. Highlights of the 2023 budget are an increase in the tax-free allowance for pensions which the Chancellor hopes will stem the number of people taking retirement, a package of help for swimming pools affected by the increase in energy bills and changes to childcare support for parents on universal credit. (Photo by Carl Court/Getty Images) | Getty Images

Budget 2023 is ‘dressing up stagnation as stability’ says Keir Starmer

Labour leader, Sir. Keir Starmer, has described the Chancellor’s budget as “dressing up stagnation as stability”.

"His opening boast was that things aren't quite as bad now as they were in October last year after the kamikaze budget. The more he pretends everything is fine, the more he shows just how out of touch they are.”

Mr. Starmer said the budget “leaves us in the waiting room with a sticking plaster”.

Labour leader, Sir. Keir Starmer.Labour leader, Sir. Keir Starmer.
Labour leader, Sir. Keir Starmer. | .

OBR project living standards to fall by 5.7%

The Office of Budget Responsibility (OBR) forecasts living standards will fall by “6% over this fiscal year and next as inflation outstrips income growth”. This fall in living standards is the worst since records began in the 1950s.

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