Budget 2023 for pensions and families: Lifetime tax-free pension allowance scrapped and free childcare boost in ‘back to work’ budget

Published

1 year ago

March 16, 2023

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Jeremy Hunt has abolished the lifetime tax-free pensions allowance and introduced free childcare for youngsters under three in a budget aimed at getting people back to work.

The chancellor announced his budget plans on Wednesday to get older people back in work and to help parents, mainly women, who cannot afford to go back to work due to high childcare costs.

For older people – who he said he preferred to describe as “experienced” – Mr Hunt has increased the annual tax-free pension allowance and abolished the Lifetime Allowance.

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The changes to pensions are:

• Annual tax-free pension savings allowance increased by 50% from £40,000 to £60,000

• Lifetime Allowance on pension savings scrapped so people will now be allowed to put aside as much as they can in their private scheme without being taxed (currently a £1m threshold)

On childcare, Mr Hunt announced:

• Ratios of two-year-olds to staff at nurseries can be increased from 1:4 to 1:5 – this is optional

• Parents on Universal Credit who are moving into work will have their childcare costs paid upfront by the government

• The maximum Universal Credit parents can claim will be increased to £951 for one child and £1,630 for two children – an increase of almost 50%

• Schools and local authorities will be funded to increase wraparound care so parents can have their children looked after between 8am and 6pm by September 2026

• In households where all adults work at least 16 hours, every child from nine months old to school age will get 30 hours of free childcare per week by September 2025

There will be a staggered introduction:

• 15 hours of free care a week for two-year-olds, from April 2024

• 15 hours of free child care for all children from nine months and up, from September 2024

• The free child care will not apply to those who work less than 16 hours a week, those studying or training.

The timetable for free childcare may never be realised

Tamara Cohen

Political correspondent

@tamcohen

Jeremy Hunt’s childcare announcement is the rabbit out of a hat it was billed to be – 30 free hours for children from the age of nine months to the start of school.

But before parents of toddlers get excited about saving some of the eyewatering costs, take a look at the timetable.

Working parents of two-year-olds will get half of that – 15 subsidised hours – in a year’s time, from April 2024.

An election is expected that summer or autumn, with a deadline of January 2025.

And the full policy – including the most expensive bit, which is free hours for babies who have the highest staff-to-child ratios at one adult for every three children under two – will not be delivered until well after the election, in September 2025.

If Labour are in power then, they will need to find the money to deliver it. Their shadow education secretary Bridget Phillipson has already said Labour’s plans for a modern childcare system would not involve the “free hours” system which she says fails parents and providers.

The Office for Budget Responsibility, which provided a financial forecast alongside the budget, said the childcare changes would mean around 60,000 parents of young children would enter employment by 2027-28.

Talking at a nursery after delivering the budget, Mr Hunt admitted many more nurseries and childminders are needed to fulfil the 30 hours commitment.

“We’re willing to start it as soon as possible, but the advice we’ve had is this is such a big change in the market that it wouldn’t be possible to do it overnight,” said the chancellor.

While the Tories lauded the announcements as Mr Hunt’s “rabbit out of the hat” moment of the budget, childcare providers had a mixed reaction.

Neil Leitch, CEO of the Early Years Alliance, said changing the staff-to-child ratios is “appalling” and it is an economic decision that parents and teachers do not want.

“It’s not just about economics, children are not commodities, we’re talking about children’s lives,” he told Sky News.

He added that there is currently not enough funding for three and four-year-olds, who are entitled to some free childcare already, so this will simply place more pressure on providers.

“They should have done this a long time ago, parents are on their knees, providers are on their knees,” he said.

Joeli Brearley, founder of Pregnant then Screwed, said the campaign group is “really pleased in the significant investment” in the childcare sector as it will make “an enormous difference to parents who are really struggling to pay for those eyewatering fees”.

However, she said they are concerned about the strategy for workers who are “leaving in droves” due to being paid “appallingly badly” due to years of underfunding.

“Without the workforce, those places are impossible to deliver,” she told Sky News.

“There’s no point in rolling out free hours if we don’t ensure the providers can deliver them.”

Labour hit out at the pension plan, with Sir Keir Starmer saying: “The only permanent tax cut in the budget is for the richest 1%. How can that happen?”

He accused the Conservatives of a plan for “managed decline, Britain going backwards, the sick man of Europe once again”.

“After 13 years of Tory sticking plaster politics… working people are entitled to ask am I any better off than I was before?” he said.

“The resounding answer is ‘no’ – and they (Tories) know it.”

Mr Hunt said he had decided to make the pension changes in reaction to senior NHS clinicians saying unpredictable pension tax charges are making them leave the NHS early “just when they are needed most”.

“I have realised the issue goes wider than doctors. No one should be pushed out of the workforce for tax reasons,” he said.

Business

Employees at fintech giant Revolut to cash in with $500m share sale

Published

5 hours ago

May 18, 2024

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Employees at fintech giant Revolut to cash in with 0m share sale

Bosses at Revolut, Britain’s biggest fintech, are drawing up plans to allow employees to cash in with a sale of stock valued at hundreds of millions of pounds.

Sky News has learnt that the banking and payments services provider is lining up investment bankers to coordinate a secondary share sale worth in the region of $500m (£394m).

Morgan Stanley, the Wall Street bank, is expected to be engaged to work on the proposed stock offering, which will take place later this year.

Money blog: How to sell your home without an estate agent

City sources said this weekend that Nik Storonsky, Revolut’s co-founder and chief executive, was determined to seek a valuation of at least the $33bn (£26bn) it secured in a primary funding round in 2021.

“This will not be a down-round,” said one person familiar with Revolut’s thinking.

Although the fintech, which has more than 40 million customers, is not planning to raise new capital as part of the transaction, any sizeable share sale will still be closely watched across the global fintech sector.

It is expected to be restricted to company employees.

Revolut ranks among the world’s largest financial technology businesses, with revenue virtually doubling last year to around £1.7bn, according to figures expected to be published in the coming months.

Founded in 2015, it has experienced a string of regulatory and compliance challenges, with reports last year highlighting its release of funds from accounts flagged by the National Crime Agency as suspicious.

The company’s growth has taken place at breakneck speed, with customer numbers soaring from 16.4m at the point of the Series E fundraising nearly three years ago.

Insiders argued that despite the protracted downturn in tech valuations over the last two years, Revolut’s relentless expansion would easily justify it maintaining its status as Britain’s most valuable fintech.

Monzo, the UK-based digital bank, recently confirmed a Sky News story that it had closed a funding round worth nearly £500m, including backing from an arm of Google’s owner, Alphabet, and a Singaporean sovereign wealth fund.

Elsewhere, however, the funding landscape has been bleaker, with a growing number of tech companies which had attracted unicorn valuations of more than $1bn now struggling to stay afloat.

Revolut has allotted stock options to many of its 10,000 employees as part of their compensation packages, although it was unclear how many would be eligible to dispose of equity in the transaction later this year.

A source close to the company said it had had numerous expressions of interest from prospective investors.

Revolut’s current shareholders include SoftBank’s Vision Fund and Tiger Global.

News of the proposed share sale comes as Revolut’s investors continue to await positive news about its application for a UK banking licence.

The company applied to regulators to become a bank in Britain more than three years ago, but has so far failed to secure approval.

Mr Storonsky has been publicly critical of the delay, and last year questioned the approach of British regulators and politicians, as he suggested that he would not contemplate a listing on the London Stock Exchange.

An initial public offering of Revolut appears to still be some way off, although it would not surprise investors or industry peers if it initiated a listing process in the next couple of years.

One person close to Revolut said board members were among those expected to participate in the secondary share sale, although further details were unclear this weekend.

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The company is chaired by Martin Gilbert, the City veteran who has faced governance and performance challenges at Assetco, the London-listed asset manager he runs.

Its other directors include Michael Sherwood, the former Goldman Sachs executive who was jointly responsible for its operations outside the US and who was regarded as one of the most skilled traders of his generation.

An external shareholder in the company said the exclusion of non-employees from the deal could draw criticism from some investors.

Revolut has conducted secondary share sales of this kind in the past, including after its 2021 Series E round.

This weekend, Revolut declined to comment.

Business

Ex-Post Office head of IT says Paula Vennells ‘hoped to avoid’ inquiry – and reveals she blocked her number

Published

2 days ago

May 16, 2024

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Ex-Post Office head of IT says Paula Vennells 'hoped to avoid' inquiry - and reveals she blocked her number

A former Post Office executive has said she was forced to block ex-boss Paula Vennells’ phone number after the ex-CEO called multiple times asking for help to avoid an independent inquiry into the Horizon IT scandal.

Lesley Sewell, previously the company’s head of IT, told the Post Office inquiry on Thursday that former CEO Ms Vennells had reached out to her four times between 2020 and 2021.

Ms Sewell said that she blocked Ms Vennells’ number due to discomfort with the contact.

In her witness statement to the probe, Ms Sewell said that one of Ms Vennells’ emails referenced the need to fill in memory gaps regarding Horizon and “Project Sparrow”, a committee addressing issues with forensic accountants who identified flaws in the accounting system.

“Paula contacted me on four occasions in total. I recall blocking her number after the last call as I did not feel comfortable with her contacting me,” Ms Sewell said.

“I had not spoken to Paula since I had left POL [Post Office Limited] in 2015.”

According to Ms Sewell’s testimony, former chief executive Ms Vennells said that she had “been asked at short notice” to appear before a parliamentary select committee on “all things Horizon/Sparrow and need to plug some memory gaps”.

Ms Sewell says Ms Vennells added: “My hope is this might help avoid an independent inquiry but to do so, I need to be well prepared.”

Ms Sewell, who struggled to contain her emotions and broke down in tears while giving her oath at the start of her inquiry evidence, was offered support and breaks as needed by chairman Sir Wyn Williams.

Sir Wyn told the former executive: “Ms Sewell, I appreciate this may be upsetting for you, Ms Price will ask you a number of questions in a proper and sensible manner, but if at any time you feel you need a break, just let me know, all right?”

The Post Office has faced significant scrutiny following the ITV drama Mr Bates Vs The Post Office which highlighted the Horizon IT scandal.

The faulty system led to the prosecution of more than 700 sub-postmasters between 1999 and 2015, with many still awaiting full compensation despite government announcements regarding payouts for those with quashed convictions.

Business

London City Airport lands FitzGerald as first female boss

Published

2 days ago

May 16, 2024

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London City Airport lands FitzGerald as first female boss

London City Airport will on Thursday name its first permanent female chief executive as it targets approval of an expansion plan that would create nearly 1,500 jobs.

Sky News understands that the Docklands airport has told staff that Alison FitzGerald, who has been co-CEO since January alongside finance chief Wilma Allan, has landed the role.

Ms FitzGerald has worked at City Airport – the capital’s fourth-busiest – for more than a decade, becoming chief information officer and then chief operating officer.

She replaces Robert Sinclair, who left in January after six years to become boss of the High Speed 1 rail link.

The airport is owned by a consortium of Canadian pension funds and Kuwait’s sovereign wealth fund, which have backed a plan to increase its annual passenger traffic from about 6.5m to 9m.

It is appealing against Newham Council’s rejection of a planning application that would see it extend operating hours at the site, which is popular with City commuters.

The airport’s proposals include no increase in the annual number of flights and, in what it claims is a first for a UK airport, a commitment that only cleaner, quieter, new generation aircraft will be allowed to fly in any extended periods.

The appeal is being reviewed by the Independent Planning Inspector.

Its change of leadership makes London City the second of the capital’s airports to name a new CEO in quick succession, following the arrival at Heathrow of Thomas Woldbye last year.

“London City delivers one of the best passenger experiences in the UK and I’m committed to building on this success even further,” Ms FitzGerald said.