Mini-Budget: Kwasi Kwarteng says UK at ‘beginning of new era’
Chancellor Kwasi Kwarteng promised a “new approach, for a new era” as he vowed Britain would finally capitalise on the benefits of Brexit with a series of spectacular tax cuts. In a Commons statement just two weeks after taking the job, Mr Kwarteng announced a revolutionary package of measures to overhaul the British economy and bring growth up to at least 2.5 percent.
The statement, which had been dubbed a “mini budget” ahead of today, was the most radical fiscal intervention in 50 years.
Speaking in Parliament, Mr Kwarteng announced the:
Abolition of stamp duty on homes up to £250,000 and up to £425,000 for first time buyers
End of the 45p top rate income tax and a 1p cut in the basic rate to 19p
Reversal of the hike in national insurance contributions
Scrapping of planned corporation tax rises next year
The tax cuts, coupled with the energy bills package announced earlier this month, will cost a total of £105billion by 2026 according to Treasury estimates.
Kwasi Kwarteng unveiled radical tax cuts
Mr Kwarteng vowed the Government would be “bold and unashamed in pursuing growth” and was not afraid to make the “difficult decisions” to make it happen.
The announcement from the Chancellor comes amid a dire economic backdrop.
Yesterday the Bank of England raised interest rates to 2.25 percent as it warned the UK was likely already in a recession, the pound sterling fell to its lowest against the dollar since 1985, and Government bonds recorded their biggest one-day fall since the start of the pandemic.
Mr Kwarteng told MPs: “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.”
The Chancellor said he was focused on ‘growth, not just tax and spend’
Labour’s shadow chancellor Rachel Reeves said the announcements were “a return to the trickle down of the past”.
She added: “The Prime Minister and Chancellor are like two desperate gamblers in a casino chasing a losing run.
“The argument peddled by the Chancellor isn’t a great new idea or a gamechanger, as the minister said, as much as they’d like us to think so.
“What this plan adds up to is to keep corporation tax where it is today, and take national insurance contributions back to where they were in March. Some new plan.”
Rachel Reeves said the strategy was ‘trickle down’ economics
National Insurance hike reversed
The increase in national insurance contributions imposed by Rishi Sunak are to be reversed from November 6.
Mr Kwarteng’s predecessor introduced the tax rise, which broke a commitment made in the 2019 Conservative party election manifesto, in order to pay for the NHS backlog caused by Covid and to fund social care.
The reversal of the increase means the average British worker will now keep an extra £330 a year of their salary.
The Chancellor said: “It is an important principle that people should keep more of the money they earn. It is a good policy to boost the incentives for work and enterprise.
“Yesterday, we introduced a Bill that means the Health and Social Care Levy will not begin next year. It will be cancelled.”
Income tax reform
Widespread changes to income tax will come into effect from next April.
Those earning more than £150,000 a year will no longer pay the top income tax rate of 45 percent. Instead, they will only pay the 40 percent tax rate which is applied to those earning more than £50,271 a year.
About 600,000 people will benefit from the abolition of the 45p rate, saving them an average of £10,000 a year, Mr Kwarteng said.
At the same time, he brought forward a planned cut to the basic rate of income tax to 19p in the pound a year early.
Treasury officials say the basic tax rate is now the lowest it has ever been.
Stamp duty threshold increased
Stamp duty for this purchasing property will not need to be paid on homes worth less than £250,000.
Mr Kwarteng announced he was doubling the threshold at which it is first paid.
For first-time home buyers, the threshold for paying stamp duty is increasing from £300,000 to £425,000.
The Chancellor said: “The steps we’ve taken today mean 200,000 more people will be taken out of paying stamp duty altogether.”
A Treasury source added: “We have effectively abolished stamp duty.”