Key social care reforms delayed for two years as Hunt pledges more funds for care packages
Key social care reforms will be delayed by two years, the Chancellor has confirmed, with billions of funding to be provided to help deliver more care packages.
Jeremy Hunt (pictured) said the social care sector will receive increases in funding of up to £2.8 billion next year and £4.7 billion the following year.
It will enable an estimated 200,000 more care packages to be delivered, he said, calling the investment the “biggest increase in funding under any Government, of any colour, in history”.
The Chancellor praised the “heroic” work of the sector looking after children, and older and disabled people during the coronavirus pandemic.
But he said an ageing population is heaping massive pressure on services, and he has heard “very real concerns” from councils about their ability to deliver key reforms promised by Boris Johnson’s government.
These include an £86,000 cap on personal care cost contributions, and an expanded means test that is more generous than the existing one, which had been due to come into effect from October 2023.
Mr Hunt said the “important” reforms – which he linked to Sir Andrew Dilnot, architect of the original plans for a care cap – will be delayed for two years.
He will also allocate social care additional grant funding of £1 billion next year, and £1.7 billion the year after, noting that he wants the sector to help free up some of the thousands of hospital beds being occupied by people who should be at home.
He said: “Combined with savings from the delayed Dilnot reforms and more council tax flexibilities, this means an increase in funding available for the social care sector of up to £2.8 billion pounds next year and £4.7 billion pounds a year after – that’s a big increase.
“But how we look after our most vulnerable citizens is not just a practical issue, it speaks to our values as a society.
“So today’s decision will allow the social care system to deliver an estimated 200,000 more care packages over the next two years – the biggest increase in funding under any Government, of any colour, in history.”
Households to face increased energy bills, tax rises and squeeze on living standards
Households will face increased energy bills, high inflation and tax hikes as the country is hit by recession.
Chancellor Jeremy Hunt told MPs he was having to make difficult decisions to ensure a “shallower downturn”, but the economy was still expected to shrink 1.4% in 2023.
The Office for Budget Responsibility (OBR) forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year, contributing to the squeeze on living standards.
The cap on average household energy bills will increase from £2,500 to £3,000 from April.
But Mr Hunt said “this still means an average of £500 support for every household”, while there would also be additional cost-of-living payments for people on means-tested benefits, pensioner households and those on disability benefit.
He also committed to increase the state pension and benefits in line with September’s 10.1% inflation figure.
Mr Hunt said the OBR concluded the UK “like other countries” is now in recession and was facing an increase in unemployment.
While growth in gross domestic product (GDP) was expected to be 4.2% in 2022, in 2023 the economy was forecast to shrink by 1.4% before growth of 1.3%, 2.6%, and 2.7% in the following three years.
“The OBR says higher energy prices explain the majority of the downward revision in cumulative growth since March,” Mr Hunt said.
“They also expect a rise in unemployment from 3.6% today to 4.9% in 2024 before falling to 4.1%.”
The OBR’s bleak analysis showed rising prices would erode real wages and reduce living standards by 7% in total over the two financial years to 2023-24, wiping out the previous eight years’ growth, despite over £100 billion of additional Government support.
Mr Hunt told MPs he was taking “difficult decisions” to curb inflation.
“High inflation is the enemy of stability. It means higher mortgage rates, more expensive food and fuel bills, businesses failing and unemployment rising.
“It erodes savings, causes industrial unrest and cuts funding for public services. It hurts the poorest the most and eats away at the trust upon which a strong society is built.”
Mr Hunt was setting out a package of around £30 billion of spending cuts and £24 billion in tax rises over the next five years.
His package is in stark contrast to his predecessor Kwasi Kwarteng’s ill-fated plan for £45 billion of tax cuts, less than two months ago, which spooked the markets, pushed up the cost of borrowing and contributed to the downfall of Liz Truss’s short-lived administration.
Mr Hunt said: “I understand the motivation of my predecessor’s mini-budget and he was correct to identify growth as a priority. But unfunded tax cuts are as risky as unfunded spending.”
He told MPs: “Anyone who says there are easy answers is not being straight with the British people: some argue for spending cuts, but that would not be compatible with high-quality public services.
“Others say savings should be found by increasing taxes, but Conservatives know that high tax economies damage enterprise and erode freedom.
“We want low taxes and sound money. But sound money has to come first because inflation eats away at the pound in people’s pockets even more insidiously than taxes.
“So, with just under half of the £55 billion consolidation coming from tax, and just over half from spending, this is a balanced plan for stability.”
Blaming Vladimir Putin’s invasion of Ukraine for the “global energy crisis, a global inflation crisis and a global economic crisis” he said “we have risen to bigger challenges before”.
“We aren’t immune to these headwinds but with this plan for stability, growth and public services, we will face into the storm,” he said.
“There may be a recession made in Russia but there is a recovery made in Britain.”
Measures announced by Mr Hunt include:
- The threshold at which the 45p top rate of income tax is paid will be reduced from £150,000 to £125,140, although different rates apply in Scotland.
- The income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds will be frozen until April 2028, something which will result in more people paying more tax as a result of “fiscal drag” as wages increase.
- The windfall tax on oil and gas giants will increase from 25% to 35% and a 45% levy on electricity generators will help raise an estimated £14 billion next year.
- Tax-free allowance for capital gains will reduce in 2023-24 from £12,300 to £6,000 and again to £3,000 in 2024-25.
- Electric vehicles will no longer be exempt from vehicle excise duty from April 2025, to make the motoring tax system “fairer”.
- Government spending will continue to increase in real terms every year for the next five years, but at a slower rate than previously planned.
- Stamp duty cuts announced in Mr Kwarteng’s mini-budget will now be time-limited, ending on March 31 2025.
- The Government would protect the increases in departmental budgets already set out in cash terms for the next two years, meaning real-terms cuts due to inflation and pressure on public sector wages.
- The defence budget will keep meeting the Nato target of 2% of GDP but the overseas aid budget will not be returned to its goal of 0.7% of national income “until the fiscal system allows”.
- An extra £2.3 billion per year will be invested in schools in England over the next two years.
- The implementation of social care reforms will be delayed for two years.
- The NHS budget in England will increase by an extra £3.3 billion in each of the next two years.
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