Today the Government announced its 2023 Budget. You can read our response here.
In the blog below, our Research & Policy Officer, Anna Mowbray, will breakdown the headline and explain what this Budget will mean for you and your family.
We were pleased to hear that the Government has seen sense and extended the energy price guarantee to protect households from soaring high energy costs. This means that if you’re an average household, you will continue to have your energy costs capped at £2,500 a year until the end of June. According to current predictions, by the time the energy price guarantee ends, the energy price cap (the price the regulator sets as a maximum that consumers pay) will have fallen below the energy price guarantee rate.
The Government also made an important change if you use a pre-payment meter for your energy. It said that you will no longer be penalised and pay more per unit compared with people who pay by direct debit. Unfortunately, if you pay for your energy by cash or cheque, you could still pay more.
However, the Government will no longer offer the £400 energy bills support scheme which gave us all up to £67 a month off our energy bills. The result is that this year will be even harder than last year, with families paying on average £285 more for energy over the next 12 months than the last 12 months (according to the ECIU).
The Chancellor made big announcements about expanding free childcare, but we’ve got concerns those declarations are not backed up with proper funding that will actually resolve our childcare crisis.
What did the Chancellor say? He promised that rather than only receiving hours of free childcare the September after your child turns three, you will eventually be able to receive free childcare from the end of maternity, paternity, or parental leave.
However, this is going to be rolled out slowly over time. Parents of two-year-olds who are in work will be able to get 15 hours of free childcare from April 2024.
From September 2024, this will be extended to all children aged from 9 months upwards.
And then from September 2025, all working parents of under-fives will get 30 hours of free childcare a week.
We’re very concerned that “free” may not really mean free. At the moment, parents receiving the 30 hours of free childcare for three-year-olds often find themselves having to pay for extra costs, like meals, as funding from the Government just doesn’t cover the costs for nurseries for providing the places. Moreover, this offer is term time only, so doesn’t work for most families who need affordable childcare all year around.
All this means childcare providers may not be able to afford to offer all this extra childcare the Chancellor has announced.
Finally, we’re really concerned that the Chancellor has reduced the ratio of staff to children that will legally apply in early years settings. Reducing ratios could mean more work for staff and even compromise the safety of our children.
Unfortunately for our members working in early years, the Chancellor didn’t say anything about increasing pay in the sector. We know that without expanding the sector significantly, this extra promised provision won’t happen. And we know that low pay is keeping people out of the sector.
Community continues to campaign for a better deal for the critical childcare and early years workforce.
No support for green steel
The Chancellor’s speech today contained no plans to develop a desperately needed industrial strategy and help deliver green technologies for industries like steel to help the UK reach our Net-Zero goals. We need a structural reform of our energy system to once and for all bring our prices in line with our European competitors, which will be central to support energy intensive industries such as steel to compete and adopt low carbon steelmaking technologies.
We were bitterly disappointed by this and continue to campaign for the government to step up and support our industry.
The cost of living
The Budget also contained what sounds like good news for the cost of living. It’s predicted that inflation is going to fall back to 2.9% by the end of the year. But that doesn’t mean prices will fall. Prices will still be more expensive than they were in 2022.
And the OBR says that real household disposable income will fall by 6% over the next two years. So, we’re all going to feel the squeeze.
The Chancellor also announced changes to pensions. First, he raised the pensions annual allowance, which is the maximum that you can save into your pension each year, from £40,000 a year to £60,000.
He also announced that the pensions lifetime allowance will be scrapped. The lifetime allowance was the maximum you could save into your pension over your whole life before paying extra tax.
Why has the Chancellor made these changes? He claims this will help retain GPs and other doctors who are facing big tax bills, as working for longer meant that they breached these allowances.
We are concerned that these changes – while they might help some doctors – may encourage other workers to retire earlier, as they reach their pensions savings goals more quickly.
Finally, the Chancellor told us that the Work Capability Assessment will be scrapped. This should mean that people with disabilities can look for work without losing benefits. However, it could mean that some lose out on support if they don’t get assessed.
The Government is also making sanctions stricter on people it thinks should be working. This includes those working less than 18 hours a week.
As our benefits sanctions are already draconian, we are concerned that this deeply unfair measure unfair will have a negative impact on vulnerable people’s health and finances.
We will keep you informed as we get more details about how these policies might work in practice.
If you are a member of Community and need advice or support, please contact our Service Centre at firstname.lastname@example.org or on 0800 389 6332.