Kwarteng dramatically cuts tax, and rolls the dice on growth

Kwarsi Kwarteng, Chancellor of the Exchequer for less than two weeks, has today unveiled the largest tax-cutting measures in Britain since 1972’s Barber budget.

In what represents a significant change in both policy and political approach by the new Truss government, Kwarteng told the Commons, “For too long in this country we have indulged in a fight over redistribution, now we need to focus on growth, not just on how we tax and spend”.

His mini budget was presented to MPs Kwarteng. This was a significant step in reducing the budgets of Rishi Sunak, the former Conservative Chancellor.  This included:

  • The cancellation of the 1.25% increase in National Insurance contributions for employers and employees.
  • The cancellation of the planned increase in corporation tax from 19% – 25%.
  • The planned duty rise on beer wine, spirits, and other beverages has been scrapped

Going further than simply reversing Rishi Sunak’s proposed tax rises, Mr Kwarteng then introduced a whole range of further tax cuts including:


Featured

Nala, a first-timer, wins the scurry League


Featured

BASC logo

Firearms licensing inconsistencies “are symptomatic of wider police failures”

  • The April 2023 deadline has been extended to allow for a reduction in the basic rate income tax to 19%.
  • A cut to stamp duty, with the limit raised to £250,000, with a higher limit of £425,000 for first time buyers.
  • The abolition of the top ‘additional’ rate of income tax that sits at 45%.

As a consequence of today’s mini statement, the Truss administration has embarked on a course where it is prepared to tolerate increased near term government borrowing on the premise that the associated tax incentives will stimulate medium term economic growth.

The Chancellor also detailed details of the associated reforms the government plans to implement to boost enterprise, in addition to his tax cuts. These included plans to reform London’s planning system, to tighten restrictions on strike action being called, for regulatory reform in London (including the removal of restrictions on bankers bonuses) and for the creation of a variety of new enterprise areas.

Yesterday, the Bank of England projected that UK growth would decline by 0.1% between July 2022 and September 2022. Mr Kwarteng set a medium-term growth target of 2.5% for the UK.

Mr Kwarteng’s approach was immediately criticized by the Shadow Chancellor, Rachel Reeves, who highlighted how there was now a clear ‘battle of ideas’ as well as a battle of policies in British politics.

Pointing to the failure of the government to publish full forecasts on the impact of its plans, Reeves told the Commons that Kwarteng’s announcement was ‘a menu without prices’.

Conitnuing Reeves said, “It is unprecedented to have a fiscal announcement of this scale with no independent forecasts from the Office of Budget Responsibility. Never has a government borrowed so much and explained so little”.