New government rolls the dice with mini-Budgetby
Kwasi Kwarteng’s statement today went by several names, but in tax terms at least, it is more significant and seismic than any Budget since Britain voted to leave the European Union in 2016.
Known officially as the Growth Plan 2022, Kwarteng’s mini-Budget or fiscal event sets the country on a different course – one which presents the new Chancellor of the Exchequer and Prime Minister as high-rolling gamblers.
The big question is whether their economic strategy, intended to achieve annual growth of 2.5%, will have the success enjoyed by the likes of investors like George Soros and Warren Buffett or an impact on the country similar to that of Rogue Trader Nick Leeson on Barings Bank, which literally went bust as a result of his billion-dollar gambling spree.
Many of us might enjoy sitting on the sidelines to see whether the new government’s almost unprecedented approach to rescuing the country’s finances works out, were it not for the price that we will all pay if Kwarteng proves to be a Leeson rather than a Soros.
As with every Budget in recent times, many of the juiciest bits were leaked to the media long before the Chancellor made his formal announcement.
Everything has been built around Liz Truss’s theory that by making the rich even richer, for example removing restrictions on bank executives’ bonuses (confirmed today), society will suddenly be awash with cash to feed the hungry, heat the freezing and win the next general election.
Mischievous commentators had suggested that the reason the Chancellor did not want to badge this as a formal Budget was that he would then have had to get proper (and potentially embarrassing) costings from the independent Office for Budget Responsibility, though the government confirmed it will publish its own estimates.
Instead, he went ahead with a fiscal event that contradicted the received wisdom of every previous Tory Chancellor in living memory, let alone their Labour rivals, by simultaneously concentrating on spending and cutting taxes.
Despite the Prime Minister’s initial protestations about offering any kind of support package to those potentially rendered destitute by soaring energy prices, we already knew the level of the energy price cap for Individuals and its equivalent for business, if not the cost to the Exchequer, estimated to be at least £100bn.
Amongst the other headlines from Kwasi Kwarteng’s statement, two of Rishi Sunak’s flagship policies are to be reversed.
His 1.25% NIC levy for both employees and employers to fund the National Health Service and social care will be ditched with effect from 6 November 2022.
In addition, Sunak’s proposal to introduce gradual increases in corporation tax until it reached 25% has bitten the dust. Encouragingly, various investment allowances will also get a boost.
Smaller businesses that are struggling might receive no benefit at all from the reduction in corporation tax rates until they eventually tip into profit. While they will welcome the six months freeze on energy costs, there seems little else to put smiles on the faces of careworn directors, with no announcements of an overhaul of the business rates scheme or reductions in charges.
Elsewhere, there is to be a consultation on the introduction of new Investment Zones across the country and infrastructure rule changes, with loosened planning regulations and a sweetener of tax incentives. Details are sparse at present, although they include NIC and investment reliefs.
There has been much media speculation as to other proposals including two “rabbits” to be pulled out of the hat if the Daily Telegraph was to be believed. In fact, the statement was more like Watership Down at times.
Income tax was inevitably to come under close scrutiny with hints that the 1% reduction in the basic rate planned for immediately before the next general election might come into play from 2023-24. The additional rate of 45% is also abolished but seemingly the zero-rate band will not be extended. How these measures, from a Chancellor who specifically stated a lack of interest in the redistribution of wealth, will help the poor is not immediately apparent.
There were also whisperings about a reduction in stamp duty, confirmed by the Chancellor with news that stamp duty will be removed from properties worth up to £250,000 or £425,000 for first-time buyers purchasing properties for up to £625,000. Readers might recall that previous stamp duty holidays or cuts didn’t seem to reach purchasers, merely allowing vendors to increase selling prices. It will be interesting to see whether the same happens this time around. As for the suggestion floated by Liz Truss during her campaign that inheritance tax might be abolished, that may have to wait a year or two.
Save the date for 2023 and register your interest!
We're already planning a bigger and better Expo 2023 and
are excited to announce that we're moving to a new venue.
Register your interest and we look forward to welcoming
you to the NEC, Birmingham, 15 - 16 November 2023.