Hunt 'prioritised richest 1% over struggling families', Starmer says

The Institute for Fiscal Studies has said it is 'highly uncertain' what the extension of free childcare will have on the labour market. ITV News Political Correspondent Libby Wiener reports

Sir Keir Starmer has said Jeremy Hunt chose to prioritise the UK's richest 1% with his Spring Budget, rather than using it to provide support to struggling families.

The Labour leader attacked the chancellor for a pensions tax cut the government says was designed to retain NHS doctors and bring senior staff out of early retirement.

But by abolishing the limit on tax-free pension savings, known as the Lifetime Allowance, the chancellor is helping everyone who has the potential to put away over £1 million, of which there are very few in the UK, the Labour leader said.

"We've spent £1 billion on the richest 1% while everybody else is struggling with the cost-of-living crisis," Sir Keir said.

"I think most people would say, 'How on earth can that be a priority for the government?"'

He accepted the government did extend energy support in the Budget, but the Institute for Fiscal Studies said earlier that households in the UK will still feel "continuing pain" in 2023.

The IFS says Britons will still experience "the worst two years on record for household incomes".

IFS Director Paul Johnson, poking holes in Mr Hunt's Budget for growth, said most basic-rate taxpayers will be £500 worse off next year and most higher-rate payers £1,000 due to the freeze of income tax and national insurance thresholds.

"The OBR (Office for Budget Responsibility) may be relatively optimistic about the medium term, but it still thinks these will be the worst two years on record for household incomes," he told a press conference.

"Its projections suggest that real household disposable incomes will be no higher in 2027 than they were in 2019, and barely higher than in 2017 - a lost decade for living standards."

Prime Minister Rishi Sunak denied the government was making the cost-of-living crisis worse for people by freezing income tax thresholds.

Speaking to broadcasters during a visit to a south London hospital, he asked voters to focus on the continued energy support scheme to reduce bills.

"If there's one thing you take away from the Budget it's that," the PM added.

"That will demonstrate that this government is on people's side, we care about this and we're going to keep supporting you."

Economist Mr Johnson also questioned why Mr Hunt had found £20 billion a year for things such as a fuel duty freeze or a cut to draught beer duty, but nothing for public sector workers.

He said the government's argument that public sector pay rises are unaffordable "flounders on the fact" that tens of billions were spent elsewhere. "This is a question of choices and priorities," he said.

Mr Hunt told ITV News that it's "not either or" and appeared to hint a deal with some public sector unions on pay increases would be agreed soon.

On pay negotiations with health unions, which are currently ongoing, the chancellor said: "Let's see what happens, the discussions are going on. I hope we'll hear soon what happens."

Asked if he was optimistic, he said "let's wait and see".

The IFS also criticised Mr Hunt's pension reform, which he hopes will attract doctors out of early retirement into the workforce.

Mr Hunt abolished a limit on how much people can put into their pension pot tax free but it only impacts high earners able to save more than £1 million into their pension - of which there are very few in the UK.

Mr Johnson said scrapping the pensions lifetime allowance was also unlikely to play a "big part" in increasing the numbers of people in work while being very expensive.

"Even on OBR's, in my view optimistic, assumptions this will come in at £100,000 per job," he said.

"The lack of any coherent strategy here remains deeply disappointing."

Mr Hunt insisted his plan will bring doctors back to the NHS but did not deny the tax cut only impacts high earners.

He told ITV News he'd opted to remove the limit on tax-free pensions savings rather than develop a scheme to target doctors specifically because it was the quickest way to implement change.

He said he would not describe the lifting of lifetime allowances as a tax break for the wealthy but as something which will restore the NHS workforce.

Harriett Baldwin, the chairwoman of the Commons Treasury Committee, said she was "very surprised" that the abolition of the cap on the lifetime pensions allowance had not been limited to doctors.

The Conservative MP told a Resolution Foundation discussion: "I was personally very surprised that the pensions cap was done to apply to everyone."

She said she was expecting it to "apply to those in NHS pensions schemes" but instead Chancellor Jeremy Hunt had opted for the "simpler approach which is doing it for everyone".

Despite the tax-break for wealthy pensioners, the chancellor admitted on Thursday morning that the "burden of tax will be higher" for many households across the country.

He insisted that, despite many being worse off in terms of things like income tax, it was the right thing to do to help people get through a difficult patch.

Jeremy Hunt defends his pension reforms:

In another bid to boost the economy Mr Hunt extended 30 hours of free childcare to parents of one and two year olds, rather than it only being available for those with three and four year olds as was previously the case.

This was another move to encourage people to work more, amid complaints that parents were finding it cheaper to quit work rather than pay for expensive childcare.

Mr Johnson said such a significant move would bring "risks" for the childcare market if it was not properly funded.

He added: "The impact this will have on labour supply is highly uncertain, though the OBR score it as the biggest policy contribution to increasing numbers in work.

"The main effect will be to reduce the cost of childcare for those working parents who would have paid for childcare anyway."

Apprenticeships for over 50s along with schemes to help disabled and injured people work more if they desire were also announced as part of Mr Hunt's drive to boost the workforce and fill the hundreds of thousands of vacancies in the UK.

The Office for Budget Responsibility says the labour supply package should bring over 110,000 people into the workforce - a prediction Mr Johnson says is "very uncertain".

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Even if it is correct, it would be "just a fraction" of the number lost from the workforce in the last couple of years, the IFS director said, and it is "dwarfed by annual net immigration numbers assumed at 245,000.

Mr Johnson said the labour supply package, if successful in boosting the workforce, will cost around £7 billion a year - nearly £70,000 per job.

Labour said it would reverse the pensions reforms if elected to government next year.

His opposite number, shadow chancellor Rachel Reeves, said: “At a time when families across the country face rising bills, higher costs and frozen wages, this gilded giveaway is the wrong priority, at the wrong time, for the wrong people.

“That’s why a Labour government will reverse this move. We urge the Chancellor and the Conservative government to think again too. 

“Labour will build a better Britain by securing the highest sustained growth in the G7, with good jobs in every part of the country.”