Yahoo Finance Budget: Five key points on Jeremy Hunt's list that impact your finances
Chancellor Jeremy Hunt can’t afford to deliver a dramatic budget. Just six months on from the chaos of Kwasi Kwarteng's mini-budget, he needs to be boring and predictable.
It means we already know a lot about what’s going to be in the budget — and five of the changes could have a significant impact on our pockets.
1. Energy bills
We’re expecting good news on energy bills. The energy price guarantee was set to rise from £2,500 to £3,000 in April, but now that wholesale prices have dropped, the cost of the guarantee has plummeted, so the government is likely to decide it can wear the cost of keeping the current limit in place.
This will come as a massive relief for millions of people. Around half of us are already finding it difficult to pay the bills, and more than one in 20 have fallen behind — rising to almost one in 10 among those in their 30s and 40s. A price hike would have tipped an awful lot of them over the edge.
Read more: Energy price cap explained: What Ofgem’s new rate means for you
There will also be an end to the system where those who can least afford it pay the most for their energy. At the moment people on pre-payment meters pay more — to cover the cost of installing the meters — but this will stop in July. It’s expected to save 4 million cash-strapped households around £45 a year.
2. Childcare
Changes to the way childcare payments are made to people on universal credit will make a huge difference.
At the moment people have to fork out hundreds of pounds to pay for childcare in order to go back to work — and they don’t get reimbursed for weeks.
In future, the support will come up-front, so parents don’t need to go into debt. The limit on maximum support is also very likely to rise after being frozen at £646 a month for years.
Unfortunately, at this stage, we haven’t had any confirmation of any broader support with childcare. There was some talk about offering tax breaks for parents, but everything seems to have gone a bit quiet on that front.
We have the third most expensive childcare system in the world — with the average full time nursery place for a child under two hitting an eye-watering £15,000. With two children in nursery, you would need to earn £38,500 to have £30,000 in your pocket after tax, so clearly it’s not only those on universal credit who are kept out of the workplace by these costs.
3. Pensions
We haven’t yet had any confirmation on possible changes to the pension system, but there are rumours that we could see an increase in the lifetime allowance — and possibly the annual allowance too. Both have been frozen for several years, so it’s about time.
It’s unlikely to be something most people need to worry about, except very high earners, those with large pensions (including NHS consultants), and self-employed people who expect to contribute a big chunk when they sell their business and retire.
Read more: Don't miss your chance to boost your state pension
However, if these allowances don’t move, over time inflation will mean people with fairly standard pensions start bumping up against the limits.
4. Back to work
There was some talk about government subsidies for more health checks at work, but we haven’t had any confirmation of that.
Instead, the government is planning a series of changes to the benefits system.
This will include some positive reforms so that people with disabilities can work for a few hours without being reassessed for disability benefits.
However, it will also include a number of stricter rules, making life tougher for those on benefits.
Read more: Budget preview: What to expect from Jeremy Hunt’s spring statement
We’re expecting a widening of sanctions for those who don’t look for work. The earnings threshold at which you no longer need to visit a work coach will rise. Partners of working people will be expected to look for work, and parents will face stricter requirements to look for work or work more hours.
It may mean more people are forced to work, but it will also make life even harder for those on the lowest incomes.
5. Duties
We’re expecting yet another freezing of fuel duty, which has become such a regular feature in recent budgets that it would be a surprise to see it rise.
There’s also the question of what Hunt is going to do about the fact the 5p duty cut is due to come to an end. On balance, it’s likely he’ll extend this too.
Meanwhile, the tax on alcohol was scheduled to rise, but this is likely to be pushed forward six months to August, while the tax on cigarettes is expected to face another hike.
Sarah Coles is a personal finance analyst at Hargreaves Lansdown and co-presents Switch Your Money On podcast.
Watch: Budget will 'break down barriers' to work in bid to fill vacancy void, Jeremy Hunt tells Sky News
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