Jeremy Hunt has promised a major expansion in state-funded childcare and tax breaks for businesses in Budget measures aimed at boosting economic growth.
The Chancellor said a recession would be avoided and inflation would fall dramatically as the economy was “proving the doubters wrong”.
But business groups have said their members will struggle to keep their doors open from next month as the Government ignored calls for extra support to help companies pay their energy bills. Mr Hunt also faced criticism for changes to pension allowances that will benefit the most wealthy in society.
Read more: key points from today's Budget
In an effort to remove barriers to work, Mr Hunt promised up to 30 hours a week of free childcare for eligible households in England with children as young as nine months, instead of three and four-year-olds under the current policy.
The phased policy, which will be fully introduced by September 2025, will be worth up to £6,500 a year for working families. The plan will cost £4.9bn in 2027-28, aiming to raise employment by 60,000 that year, as well as increasing the hours worked by mothers already in work.
The Chancellor also pledged an expansion in wrap-around care at the start and finish of the school day for parents with older children and changes to staff-to-child ratios in England to expand supply of childcare.
Mr Hunt resisted demands from Tory MPs, including Boris Johnson, to scrap April’s increase in corporation tax from 19% to 25%, but he instead promised a generous set of reliefs to help firms reduce their bills. A new policy of “full expensing” will mean that every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profit, a cut worth an average of £9bn a year for every year it is in place.
And in what was billed as a way of encouraging more senior doctors to remain in work but will work out as a major tax break for the wealthy, the lifetime allowance for pensions savings, which stands at just over £1m, will be abolished, a major tax-break for the wealthy.
Mr Hunt said: “Today the Office for Budget Responsibility (OBR) forecast that because of changing international factors and the measures I take, the UK will not now enter a technical recession this year.
“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.”
Many of the measures announced by Mr Hunt had already been released in advance of the Budget, including the creation of 12 new investment zones - with one in the North East - offering up to £80m of support each for tax breaks and incentives. A £400m fund for new Levelling Up Partnerships will benefit South Tyneside among other areas.
Figures in the Budget show that the UK tax burden is still forecast to be at a post-Second World War high, reaching 37.7% in 2027-28. And living standards, based on real household disposable income per person, are expected to fall by a cumulative 5.7% over the next two financial years, less than forecast in November but still the largest since records began in 1956-57.
Labour leader Sir Keir Starmer said: “After 13 years of his Government, our economy needed major surgery, but like millions across our country, this Budget leaves us stuck in the waiting room with only a sticking plaster to hand. A country set on a path of managed decline, falling behind our competitors, the sick man of Europe once again.
“This was a day for ambition, for bringing us together with purpose and intent, for unlocking the pride that is in every community, matching their belief in the possibilities of the future. But after today we know the Tory cupboard is as bare as the salad aisle in our supermarket. The lettuces may be out, but the turnips are in.”
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