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Kwasi Kwarteng’s mini-budget: key points at a glance
The chancellor has delivered his mini-budget – here are the main points, with political analysis
and Aubrey Allegretti
Published:09:40 Fri 23 September 2022
Kwasi Kwarteng says the government was never going to let households face soaring energy bills caused by Vladimir Putin’s war in Ukraine.
The chancellor says there will be three key steps: the energy price guarantee, equivalent support for businesses, and an energy markets financing scheme delivered by the Bank of England.
Aubrey Allegretti, political correspondent: Kwarteng starts by pinning the blame for inflation and spiralling energy bills directly on Putin.
After the criticism the Conservatives faced over the summer for months of inaction while the leadership contest dragged on, the chancellor tries to counter that narrative by claiming the new prime minister, Liz Truss, acted with “great speed”.
“People need to know help is coming, and help is indeed coming,” is intended as a rallying cry of reassurance – however he tempers that expectation by reminding people energy markets are “volatile”.
Growth and public finances
Kwarteng says the government will expand the supply side of the economy through tax cuts to target economic growth of 2.5% per year.
The chancellor says he will turn a “vicious cycle of stagnation into a virtuous circle of growth”, although cautions that “none of this is going to happen overnight”.
Kwarteng says the government will publish costings of the measures. He also commits to the Office for Budget Responsibility publishing a full economic and fiscal forecast before the end of the year.
The government’s energy support scheme is expected to cost £60bn for the six months from October.
Aubrey Allegretti: Kwarteng seeks to turn the last 12 years of Conservative economic wisdom on itself and present the government as new and radical – rather than hanging on the coattails of the last one.
He lays out his central point that “growth is not as high as it should be”, arguing this only leads to lower money to fund public services, relying on higher taxes, and so on and so on.
“We need a new approach for a new era,” should be seen as nothing less than a bid to reinvent the Conservatives and present them as a party of change – to avoid being blamed for the mistakes of the past. (Despite, of course, Truss having served in the previous three Conservative governments.)
Kwarteng says the government will bring forward measures to streamline regulations and remove EU-derived laws.
The chancellor says a list of key infrastructure projects to be “prioritised for acceleration” today.
Aubrey Allegretti: To avoid accusations the government has reneged on Theresa May’s long-held mantra there is “no magic money tree”, Kwarteng put a figure of around £60bn on the expected value of the energy support over the next six months.
His insistence that the government’s approach will lead to a new era drew outraged cries from the opposition benches, who will be keen to tie him as closely as possible to Boris Johnson’s high-tax, high-spend economic approach.
He got a slightly muted reception from the Tory benches to planning reforms – a thorny issue for the Conservatives. But appealing to traditional deregulation instincts, Kwarteng got a better reception from backbenchers when he said: “We are getting out of the way to get Britain building.”
The chancellor says the government will legislate to tackle “militant trade unions” from closing down key infrastructure through strikes.
The laws will require unions to put pay offers to a member vote, to ensure strikes can only be called once pay talks have genuinely broken down, he says.
Aubrey Allegretti: Looming across the country this winter are a set of strikes that seek to draw attention to the paltry pay offers for public service workers – including across rail services during the first and last day of Conservative party conference next month.
Any threats to curtail the powers of trade unions will get the Tory benches behind him feeling perkier.
Kwarteng confirms the bankers’ bonus cap will be scrapped, to “reaffirm” the UK’s status as a leading financial centre
He says the bonus was failing, and all it did was push up basic salaries of bankers or drive them outside the UK to Europe.
Aubrey Allegretti: Here is where Kwarteng is straddling a thinner tightrope between the various factions of the 2019-elected batch of Conservative MPs. He knows lifting the cap on bankers’ bonuses will go down like a cup of cold sick with some colleagues – particularly those from “red wall” seats.
But given the news of this move was leaked, it is likely not to draw as much outrage as if it had been announced today for the first time.
The chancellor confirms almost 40 investment zones
will be created with tax breaks for businesses.
The government is working with areas including the Tees Valley, West Midlands, Norfolk and the West of England to establish investment zones, he says.
“If we really want to level up, we have to unleash the power of the private sector.”
Aubrey Allegretti: It used to be a phrase that defined the government’s mission – but levelling up only gets a passing mention from Kwarteng. He pays tribute to it and seeks to use it to defend the swingeing tax cuts today.
The investment zones are presented as a way of boosting development and growth in those areas where planning and environmental regulations only incur increased costs and could put off investors.
Business tax cuts
Kwarteng says next year’s increase in corporation tax from 19% to 25% will be cancelled. It will remain at 19%. “We will have the lowest rate of corporation tax in the G20.”
- Reversing the tax rise will put £19bn a year back into the economy.
- Kwarteng says companies will be able to use this to “reinvest, create jobs, raise wages, or pay dividends which support our pensions”
Every additional tax on business is ultimately passed on to families through higher prices, lower pay or lower return on savings, the chancellor says.
Aubrey Allegretti: It is well known (and much rued by many Tory MPs) that the UK has an incredibly complex tax system – so his frank assessment that “it needs to be simpler” will go down well.
- The chancellor will wind down the Office of Tax Simplification (OTS) and is asking every department to focus on this instead.
Scrapping the OTS and bringing it in to “the heart of government” will also be welcomed by his colleagues, but the detail about how this will happen to ensure the work is not just forgotten and subsumed by other priorities will be key.
Expect the traditional criticism of “champagne corks popping in the city” from Labour as Kwarteng confirms that the planned beer, spirits and wine duty will not go ahead.
Such announcements are making this “mini-budget” sound more and more like an actual budget.
Higher rate income tax
- Kwarteng announces the higher rate 45% band of income tax will be scrapped entirely.
- Basic rate of income tax will be cut from April 2023 from 20% to 19%.
The chancellor says “we won’t apologise” for focusing on economic growth.
Kwarteng confirms the national insurance rise introduced earlier this year will be cancelled from 6 November
Planned increases in duty rates for beer, wine and cider will be cancelled
Stamp duty will be cut for property buyers in England and Northern Ireland. The chancellor says it is a “permanent cut” effective from today.
Aubrey Allegretti: The Treasury has for 48 hours been furious that news of its planned stamp duty cut leaked and sent the house-buying market into paralysis.
It was envisaged as being a possible “rabbit out of the hat” – a surprise, major announcement that would go straight to the top of the news agenda.
However, that would have been easily overtaken by the move Kwarteng managed to keep under wraps until announcing it with the biggest fanfare of the statement so far – scrapping the 45% higher band of income tax.
This will fuel criticisms that his mini-budget substantially benefits the better off.