Jeremy Hunt has defended his budget plan to get people back to work amid accusations he is handing a massive £1bn tax to some of the country’s richest people.
The chancellor said the measures he unveiled in the House of Commons on Wednesday would have a “transformative” impact on the economy, alleviating labor shortages that are holding back growth.
These include a significant expansion of access to state-funded childcare to remove one of the key barriers preventing parents from returning to work – a move that has been widely welcomed.
However, controversy has been sparked by a tax credit designed to discourage some 15,000 high earners from leaving the workforce early, including the abolition of the £1.07m Lifetime Pension Allowance.
Labor said it was a “wrong priority” and they would try to force a vote in the House of Commons next week.
The measure is primarily aimed at NHS consultants who are leaving the NHS because they say pension rules mean it’s not worth continuing.
However, this drew heavy criticism, with the Resolution Foundation (RF) think tank saying it was “extremely wasteful”, costing around £47,000 per post.
It said tax donations of this magnitude could lead some workers to retire early or use their unlimited retirement savings to avoid inheritance tax.
“This is a great victory for NHS consultants, but poor value for money for the UK,” said RF Chief Executive Torsten Bell.
Appearing on ITV’s Peston programme, Mr Hunt insisted he was “systematically” removing barriers to work while the government was spending five times as much to help with childcare costs.
“So this is one of the big things that business organizations like the CBI have been asking for, and it’s a transformative change for our economy,” he said.
“Because after the Brexit referendum, the country has decided that we are not going to fill our vacancies with unrestricted low-skilled migration and that’s how we’re going to do it by not doing it.”
Meanwhile, unions have complained it has found £6bn to freeze fuel tax again, while denying extra cash for public sector workers seeking increases in the cost of living.
There was also dissatisfaction among some Conservative MPs at his decision to go ahead with a planned increase in corporate tax – from 19% to 25% – although he softened the blow with a three-year temporary break allowing investment in machinery and equipment to be written off off tax.
Mr Hunt said this would make the UK “the most attractive investment environment in the world” for the next three years and he was determined to make it permanent as soon as possible.
However, he refused to commit to a tax cut before the next general election, which is likely to be held in just over a year.
“My job is to do the right thing for the economy and then people will see they can trust the Conservatives to keep the economy going. This is an election dividend. I’m not interested in playing games,” he said.
While the Office for Budget Responsibility – the official forecaster – no longer predicts the UK will fall into recession this year, it warns that the country is still facing its biggest drop in living standards in history.
Paul Johnson, director of the Institute for Tax Studies, said the chancellor had frozen the fuel tax instead of giving bounties to striking nurses and teachers.
He warned that households faced an “extremely difficult” period with a series of large personal tax increases due to start next month.
Freezing the income tax brackets, announced by Mr Hunt in an autumn statement in November, will mean base rate taxpayers will pay an extra £500 in 2023-24, while higher rate taxpayers will pay an extra £1,000.
“These tax increases may be fiscally necessary, but they are an important part of why household income is expected to fall more in the current two-year period than ever before,” he said. .