Energy Prices
The Chancellor outlined the Government’s energy price guarantee which limits the unit price of gas and electric for 2 years, capping the annual average household bills at £2,500. The Government is continuing with the existing plans of a £400 rebate to each household this winter, with millions of the most vulnerable households receiving additional payments, and potential savings of £2,200 this year.
Rising energy costs creates a real risk to energy businesses. To support this market, the Chancellor announced a market financing scheme with the Bank of England to offer emergency liquidity to energy suppliers and cap unit price limits for companies.
The Government’s energy plan will reduce peak inflation by 5%, which will lower the wider cost of living expenses and help businesses and the British people with the cost of energy.
The Chancellor says the cost for six months of the energy plan will be £60bn.
Economic Growth
The Chancellor says Great Britain “needs a new approach for a new era” to reach 2.5% growth.
Outlining the Government’s new mini-budget growth plan, he set out a new approach for growth centered around 3 central policies:
- Supply side reform
- Maintaining a sensible approach to public finances
- Cutting taxes to encourage growth
The Chancellor endorsed the Government’s use of borrowing powers to fund temporary measures to support families and businesses, adding that “the heavy price of inaction would have been far greater than the cost of these schemes.”
The Chancellor continued to state that there are too many barriers for enterprise, and that we need to approach this by reforming the economy.
To drive growth, The Chancellor explained we need new sources of capital investment and as such, pledged to accelerate reforms for the pension charge cap which will unlock pension fund investments into UK assets and high growth businesses.
This will benefit savers and provide up to £500m in innovative funds and attract billions of additional pounds into the UK science and technology scaleups.
New Bill Of Planning Restrictions
Mr. Kwarteng described the current planning system as “too slow and fragmented” and explained the need to end this. The new bill will “streamline consultations and endless duplications” and he pledges to “get Britain building.”
Additionally, he will prioritise infrastructure projects for transport, telecoms, and energy.
Unemployment
Unemployment is at the lowest level for nearly fifty years with more job vacancies than unemployment.
The Chancellor confirmed several policies as part of his mini budget, with a view to reducing benefits if people do not fulfill their potential working hours. This includes up to 120,000 people who are currently claiming universal credit and that will need to take extra steps to earn more money or face having their benefits reduced.
National Insurance
Personal taxation is an important principal, that people should keep more of the money that they earn. This is a good policy to boost incentives for work and enterprise.
The planned increase in employer national insurance contributions and dividends tax will be cancelled and the interim increase of the national insurance rate brought in for this tax year will also be cancelled.
This cut will take place from the earliest possible moment of 6th November 2022 reversing the levy of a tax cut for twenty-eight million people worth on average £330 every year.
A tax cut for nearly one million businesses and the additional funding for the NHS and social care services will be maintained at the same level.
Tax
Mr. Kwarteng went on to say that “tax determines the incentives across our whole economy, we believe high taxes reduces the incentive to work, they deter investments, and they hinder enterprise.”
As such, he announced several Government taxes cuts:
- Cutting taxes for businesses in designated sites for 10 years
- Accelerated tax reliefs for structures and buildings
- 100% tax relief on qualifying investments in plants and machinery resulting in the annual investment allowance to remain at £1m rather than the predicted decrease to £200k.
- The scrapping of stamp duty on newly occupied business premises.
- If a business hires a new employee, for the first £50k they earn, the employer will pay no national insurance whatsoever.
Mr. Kwarteng explained that the interests of businesses is not separate to the interests of the people, as it is the businesses who employ the most people in the country.
It is businesses that invest in the products and services the country relies on, so every additional tax on a business is ultimately passed onto families through higher prices, lower pay, and lower returns on savings.
The Chancellor announced that the planned increase to corporation tax will be cancelled and will remain at 19% instead of increasing to 25%. This will result in Great Britain having the lowest corporation tax in the G20 and will plow almost £19bn back into the economy which is for business to “reinvest, raise wages or pay dividends that supports our pensions”.
Additionally, it was announced the bank surcharge will remain at 8%. Mr. Kwarteng said, “our duty is to make the United Kingdom one of the most competitive economies in the world and we are delivering, we will deliver on this.”
Changes to the Tax System
For the tax system to favour growth, it needs to be much simpler, and the Chancellor announced his plan to embed tax simplification into the heart of the Government, rather than having it separate to the Treasury and HMRC. This will be achieved by mandating all of his tax officials to focus on simplifying taxes to achieve a simpler system.
The plan to do this is by automatically sunsetting EU regulations by December 2023, requiring departments to review, replace, or repeal retained EU laws. The Chancellor said that this “will improve growth and restore the primacy of UK legislation.”
The UK welcomes millions of tourists each year and in order for our high streets, airports, and shopping centres to feel the economic benefit, an introduction of VAT free shopping for overseas visitors was announced.
The Government’s drive to modernise also extends to alcohol duties with an introduction of an 18-month measure for wine duty and a draught relief on smaller kegs to support smaller breweries. The planned alcohol tax increase has been cancelled.
Income Tax
Mr. Kwarteng said high tax rates damage Britain’s competitiveness, they reduce the incentive to work, invest and start a business.
He continued, “The higher the tax, the more ways people seek to avoid them, work elsewhere or simply work less.”