Chancellor of the Exchequer Kwasi Kwarteng has delivered his inaugural mini budget to Parliament this morning, with a focus on stimulating the economy through a raft of tax cuts and abolishments
Among some of the measures the government has announced are the abolishment of stamp duty for new businesses, the opening of government land for the creation of new homes and businesses and financial relief for first time buyers.
The basic income tax rate will be cut from 20% to 19% in the next financial year, and there will be more of a hardline for those receiving Universal Credit in a bid to fill the large number of vacancies the UK workforce are facing.
Kwasi Kwarteng also announced a repeal of corporation tax and the abolishment of bankers caps, in an effort to “reaffirm the UK’s status as a financial service centre.”
Kwasi Kwarteng’s Mini-Budget announcements
The government will freeze energy prices, capping the limit at £2500 for each household over the next two years. They will also provide houses a £400 energy rebate per household.
For businesses, including schools and pubs, the government will subsidise wholesale energy prices and create an Energy Market Finance Scheme - offering a 100% guarantee for emergency liquidity for energy traders.
Tax and Inflation
As previously predicted, the hike in National Insurance payments has now been reversed and will take effect from November 6 2022. The basic rate of income tax will now be 19p with the top rate cut to 40%
There will also be a winding down of the Tax Certification Office, mandating every tax official to simplify the systems in place.
The government will also look to cut peak inflation by 5% and to reach a trend rate of growth of 2.5% - this will be done through tax incentives and reforms for businesses to deliver higher wages and fund public services.
With Kwarteng looking to remove the “unnecessary cost for businesses” the chancellor has reversed planned corporate tax rises and repealed the 2017 and 2021 tax reforms, but this will be kept under review.
The planned Corporation Tax increase will be cancelled - remaining at 19% rather than 20% and to be the lowest in the G20, with the hope the additional £19b saved will be used to reinvest in wages or pension dividends.
Businesses and investment
The chancellor announced the formation of local investment zones, which will see the government free up land that they own for new businesses and the building of new homes.
The areas mentioned so far include Tees Valley, Norfolk and West England, however there are set to be 40 zones in total.
New businesses in these zones will see a tax relief of 100% alongside the first £50,000 a business is no longer required to be paid as National Insurance. These businesses will also benefit from a lack of stamp duty on zoned land and no business rates.
The proposed Bankers Cap will be abolished and the annual investment allowance will not fall to £200,000 but remain at £1m pounds.
Planned increases in alcohol duty have also been scrapped, and there will be an 18-month transitional measure for wine duty and to cover smaller kegs of up to 20 litres for local breweries.
Social welfare and benefit:
In an effort to get more people into the large number of workplace vacancies across the county, the chancellor has states there will be a reduction to universal credit for those that do not take active steps to look for work.
That includes looking for more or better work during the cost of living crisis.
There will be financial support for those over the age of 50, and in perhaps a stance on the upcoming rail strikes, Kwarteng announced there will be legislation on pay offers by unions to membership voting, leading to strikes only called when negotiations have genuinely broken down.
Good news for first time buyers though during the budget, with the government pledging the increase of the dispersal of government owned land for new homes.
There will be a cut in stamp duty for new buyers at £250,000, with that cut raised to £425,000 for first time buyers.
First time buyers will also see a relief of £500,000 to £625,000.
What has the reaction to the Mini Budget been?
“It’s all based on an outdated ideology that says if we reward those who are already wealthy, the whole of society will benefit”, Labour’s shadow chancellor, Rachel Reeves, retorted in Parliament after the announcement.
“As President Biden said this week, he is sick and tired of trickle-down economics. And he is right to be. It is discredited, it is inadequate, and it will not release the wave of investment that we need."
Outside of the houses of parliament, the BBC are reporting that The Royal College of Nursing (RCN) union is urging its members to vote for strike action following the chancellor’s statement.
RCN general secretary and chief executive Pat Cullen says the decision to cut the cap on bankers’ bonuses shows the government is focusing on “the wrong priorities”.
“Nursing will be dismayed by the decision to prioritise well-off bankers over NHS and social care staff, some of whom are using food banks and live on a financial knife-edge,” she says.