The chancellor has this morning set out the government's plan to 'solve the riddle of growth' and to help people with the cost-of-living crisis with widespread tax cuts for the highest earners in a 'new era'. Kwasi Kwarteng delivered the government's mini budget to the House of Commons as he announced expected caps to rising energy bills and lifting the cap on bankers bonuses.
Here are some of the major points from the mini-budget.
Energy prices
The Chancellor began by insisting “help is coming” for people with their energy bills. He said the energy price guarantee will limit the unit price that consumers pay for electricity and gas, saying: “This means that for the next two years, the typical annual household bill will be £2,500. For a typical household, that is a saving of at least £1,000 a year, based on current prices. We are continuing our existing plans to give all households £400 off bills this winter. So taken together, we are cutting everyone’s energy bills by an expected £1,400 this year."
Millions of the most vulnerable households will receive additional payments, taking their total savings this year to £2,200, Mr Kwarteng added. Energy relief will also come for businesses under the Energy Bill Relief Scheme.
READ MORE: What the government's mini-budget means for you
He said it will "reduce wholesale gas and electricity prices for all UK businesses, charities and the public sector like schools and hospitals. This will provide a price guarantee equivalent to the one provided for households, for all businesses across the country". The government believes this energy plan will reduce 'peak inflation by around five percentage points'. It will cost £60 billion over the next six months, he said.
The government justified what will be a significant increase in borrowing 'to support families and businesses'. “That’s what we did during the Covid-19 pandemic. A sizeable intervention was right then…and it is right now. The price of inaction would have been far greater than the cost of these schemes,” he said. This is all in the name of growth, which he consistently referred to in his speech to the house.
Universal Credit
Changes were announced to Universal Credit which will will force people to attempt to secure more work on a weekly basis or see their payments slashed. Universal Credit claimants working up to 15 hours a week on the national living wage are now at risk of having their benefits reduced if they do not take steps to increase their earnings and meet regularly with a work coach which will affect around 120,000 benefits.
Mr Kwarteng said: “While unemployment is at its lowest rate for nearly 50 years, the high number of vacancies that still exist and inactivity in the labour market is limiting economic growth. These gradual changes focus on getting people back into work and maximising the hours people take on to help grow the economy and raise living standards for all.”
Bankers' bonuses
The Government will lift the cap on bankers’ bonuses "to build a strong financial services sector in London". He was heckled by opposition MPs and cheered by his own side as he confirmed plans to get rid of the cap on bankers’ bonuses.
He told the Commons: “A strong UK economy has always depended on a strong financial services sector. We need global banks to create jobs here, invest in London, and pay taxes in London, not Paris, not Frankfurt, not New York. All the bonus cap did was to push up the basic salaries of bankers, or drive activity outside Europe.
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“It never capped total remuneration, so let’s not sit here and pretend otherwise. So we’re going to get rid of it.
“And to reaffirm the UK’s status as the world’s financial services centre, I will set out an ambitious package of regulatory reforms later in the autumn.”
Low tax investment zones
Other measures for investment and growth included new low tax “investment zones” in areas across the country.
Kwasi Kwarteng said: “To support growth right across the country, we need to go further, with targeted action in local areas. So, today, I can announce the creation of new investment zones. We will liberalise planning rules in specified agreed sites, releasing land and accelerating development.
“We will cut taxes. For businesses in designated tax sites, for 10 years, there will be: Accelerated tax reliefs for structures and buildings. And 100% tax relief on qualifying investments in plant and machinery.” He added: "If we really want to level up, we have to unleash the power of the private sector."
Corporation tax axed
The Chancellor told the Commons: “The interests of businesses are not separate from the interest of individuals and families. In fact, it is businesses that employ most people in this country. It is businesses that invest in the products and services we rely on.”
He added: “I can therefore confirm that next year’s planned increase in corporation tax will be cancelled. The UK’s corporate tax rate will not rise to 25% – it will remain at 19%.
“We will have the lowest rate of corporation tax in the G20. This will plough almost £19 billion a year back into the economy. That’s £19 billion for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions.”
Stamp duty cut
Stamp duty also is set to be cut. Mr Kwarteng said: "“So, to support growth, increase confidence and help families aspiring to own their own home, I can announce that we are cutting stamp duty. In the current system, there is no stamp duty to pay on the first £125,000 of a property’s value. We are doubling that – to £250,000."
Mr Kwarteng also said the stamp duty threshold for first-time buyers would be increased from £300,000 to £425,000.
Income tax and national insurance changes
The basic rate of income tax will be cut to 19p in the pound - but the rate for the highest earners on over £150,000 will be cut from 45 to 40 per cent. He said: “I’m not going to cut the additional rate of tax today. I’m going to abolish it altogether. From April 2023 we will have a single higher rate of income tax of 40%.
"This will simplify the tax system and make Britain more competitive. It will reward enterprise and work. It will incentivise growth. It will benefit the whole economy and the whole country.
"And, Mr Speaker, after all, this only returns us to the same top rate we had for 20 years – including the entire time the Opposition was last in power – bar one month."
Mr Kwarteng added: “I can announce today that we will cut the basic rate of income tax to 19p in April 2023 – one year early. That means a tax cut for over 31 million people in just a few months’ time. This means we will have one of the most competitive and pro-growth income tax systems in the world."
The Chancellor also confirmed to MPs that the health and social care levy introduced by Boris Johnson’s government would be cancelled, saying the levy, and other planned rises in national insurance contributions, would be cancelled from “the earliest possible moment”, November 6.
Alcohol duty rises cancelled
Mr Kwarteng also announced that planned alcohol duty rises would be cancelled. The Chancellor said: “Our drive to modernise also extends to alcohol duties. I have listened to industry concerns about the ongoing reforms. I will therefore introduce an 18-month transitional measure for wine duty. I will also extend draught relief to cover smaller kegs of 20 litres and above, to help smaller breweries. And, at this difficult time, we are not going to let alcohol duty rates rise in line with RPI.
“So I can announce that the planned increases in the duty rates for beer, for cider, for wine, and for spirits will all be cancelled.”
Concluding, he said: “For too long in this country, we have indulged in a fight over redistribution. Now, we need to focus on growth, not just how we tax and spend. We won’t apologise for managing the economy in a way that increases prosperity and living standards. Our entire focus is on making Britain more globally competitive – not losing out to our competitors abroad.
“The Prime Minister promised we would be a tax-cutting government. Today, we have cut stamp duty, we have allowed businesses to keep more of their own money to invest, to innovate, and to grow, we have cut income tax and national insurance for millions of workers, we are securing our place in a fiercely competitive global economy with lower rates of corporation tax and lower rates of personal tax.
“We promised to prioritise growth. We promised a new approach for a new era. We promised to release the enormous potential of this country. Our growth plan has delivered all those promises and more.”
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