Jeremy Hunt will find himself with an extra £30 billion to ease the cost of living crisis and resolve labour shortages, new research suggests.
The Resolution Foundation think tank said the chancellor would benefit from borrowing being about £30 billion lower than anticipated this year due to tax receipts recovering and a lower bill than expected for energy support.
The Office for Budget Responsibility predicted in November that the borrowing bill to support household energy bills would be £177 billion. But the figure is now predicted to be lower.
Hunt has suggested he will spend about £3 billion to extend the £2,500 level of the Energy Price Guarantee. He is also under pressure to improve the supply of workers and resolve public sector pay disputes.
Cara Pacitti, a senior economist at the think tank, said: “The chancellor will want his upcoming budget to signal a lower inflation and higher growth phase. There has certainly been some good news with the economy expected to be bigger and borrowing lower this year than feared. But there is no escape from having to focus on the cost of living crisis that families are still facing. Hunt is likely to act to prevent April’s spikes in energy bills and fuel duty.”
The CBI has called on the government to encourage more people into work by reducing childcare costs and tackling the rise in long-term sickness with tax incentives for mental healthcare.
The Resolution Foundation said Hunt could extend free childcare to one and two-year-old children at a cost of up to £6 billion. The think tank suggested adding a work allowance into universal credit for second earners in a move that would cost £2.1 billion.
Employers could also be encouraged to take on those who have suffered ill health if the government ended work assessments when people applied for universal credit. The think tank said early retirement could be discouraged with a curb on pension freedoms.
The foundation also said the pay disputes could be settled with a 5.5 per cent offer with a cost to departments of £5 billion. Pacitti said: “The chancellor needs to end public sector pay disputes and wrestle with the UK’s stagnant economic growth by focusing on encouraging more firms to invest and people to work.”