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Mar 14, 2023
Hunt to Extend Free Child Care in UK Budget to Boost Labor Force
(Bloomberg) -- UK Chancellor of the Exchequer Jeremy Hunt plans to unveil a multibillion-pound expansion of free child care in his budget as part of a package of measures to boost growth and help families weather the cost-of-living crisis, a senior official said.
Hunt will announce 30 hours of free child care per week for one- and two-year-olds, extending a policy that already applies to three- and four-year-olds, according to the official, who requested anonymity speaking about a policy that hasn’t been announced. Ahead of Hunt’s budget speech around midday on Wednesday, the Treasury said that it will extend a £2,500 ($3,000) price cap on household energy bills until June.
The chancellor is trying to revive a British economy that has been battered by surging energy prices and labor shortages. Exorbitant child care costs currently deter thousands of parents from returning to work. Hunt is also trying to steal a march on the opposition Labour Party, which views child care as a key battleground in the next general election, due in less than two years.
The measure would be the centerpiece of a budget geared toward getting people back to work, the official said. The Guardian first reported the plan, which it said would cost £4 billion. The Treasury declined to comment.
The UK has one of the most unaffordable child care systems in the OECD, pricing a growing number of women out of the workforce. That’s prompted a race between Rishi Sunak’s Conservative Party and Keir Starmer’s opposition Labour Party to announce a workable child care offering ahead of the election, which the prime minister must call by January 2025 at the latest.
Labour says that the average cost of an hour of child care for a two-year-old is now 14% higher than in 2018.
The senior official said Hunt’s budget is also due to include:
- A potential reform of alcohol duties, with higher rates charged in supermarkets than in the hospitality sector in order to boost pubs and restaurants
- A possible easing of pharmaceutical regulations, meaning the UK regulator could fast-track approval of drugs that have already been cleared in the US and EU
Those measures are expected alongside policies such as tax breaks for businesses, new investment zones across the UK, lifting the tax-free limits on payments into pension pots and extra spending on green energy projects.
With regulated energy bills otherwise due to jump to £3,280 a year for the average household, maintaining the price cap for an additional three months through to the summer will save the average family £160, the Treasury said in a statement early Wednesday.
“High energy bills are one of the biggest worries for families,” Hunt said. “With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”
Britain’s battle against double-digit inflation, fueled by a shortage of workers, has prompted the government to examine policies that can entice people back into the workforce, including those who have retired early and parents who have quit or reduced their hours to offset soaring child care costs. There are almost 490,000 more inactive people of working age than before the pandemic.
--With assistance from Kitty Donaldson.
(Updates with energy price cap extenparagraph.)
©2023 Bloomberg L.P.
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