This was not a budget – The mini-budget September 2022
What does that mean? Because this is not a Budget, the changes introduced by the country’s new Chancellor do not face the same scrutiny that a Budget would. The announcements are not accompanied with a forecast from the Office of Budget Responsibility (OBR). The OBR provides independent advice to the government and set out the cost to the country of the new policies, how much tax will be raised by the changes and what it means for the economy.
The government is refusing to publish the OBR’s analysis of the changes announced in ‘This is not a Budget!’ We will however receive something from the OBR by the end of the year when today’s announcements are a distance memory.
To put this into perspective, the government has just given away what is believed to be £45bn in tax cuts, the biggest tax cut in 30 years. In comparison the National Audit Office (NAO) states that as at June 2022 the cost of government spending as a result of COVID-19 was £376bn.
The big question many people will be asking is will the Bank of England follow these changes with another big increase in interest rates in order to try and control inflation?
So, what happened to the investment in the NHS that was going to be paid for by a rise in National Insurance Contributions (NIC)? The government tells us that the money will be found from elsewhere! It was the same Tory government which told us we must all contribute to the cost of investing in the NHS and making it fit for today’s world, will services improve, it remains to be seen!
The government has focused on energy costs, they have limited the unit rate of electricity, but wouldn’t it have made more sense to target this support to the most vulnerable through the use of the existing benefits system? Do Mr Kwarteng’s millionaire friends on the bank benches really need the benefit of the energy cap? Oh and let’s not forget that the profits of the energy suppliers are at a record high and remains unfettered by today’s ‘This is not a Budget’. The energy cost support measures announced will cost the economy £60bn for just the next 6 months.
The government plans on achieving 2.5% of growth over the medium term and this is how it will achieve it…
Article I. Bankers’ bonuses
Of course bankers’ bonuses were the most pressing of issues for our new Chancellor, it is our bankers who are really suffering from the effects of higher interest rates, energy costs etc, therefore the Chancellor has abolished the cap on bankers’ bonuses. Remember this day when we face our next banking crisis because bankers have solely focused on their bonuses regardless of the cost!
Article II. Corporation Tax
Next year’s planned increase of Corporation Tax to 25% will be cancelled. With the amount of debt many businesses were forced to pick up during the COVID-19 pandemic, the cancellation of the planned increase will be a welcome break, allowing business to steady their ships over the coming years.
Within the G7 we remain the country with the lowest rate of Corporation Tax, will this along with the removal of the bankers’ bonus cap make this country the biggest financial centre in the world?
Article III. Income Tax
The additional rate of tax of 45% has today been scraped for those earning more than £150,000.
The basic rate of income tax will also be cut to 19% from 6 April 2023, a year ahead of the previous announcement.
Article IV. National Insurance Contributions
The 1.25% increase in NIC that was introduced on 6th April 2022 will be scrapped from 6 November 2022, this will benefit both employees and employers.
Article V. IR35
There are some major reversals of the rules relating to IR35, including repealing the off-payroll working laws, this will benefit contractors.
Article VI. Stamp Duty Land Tax
The current level at which SDLT is paid has from today doubled from £125,000 to £250,000.
First time buyers also benefit from an increase in the threshold at which they will pay SDLT, with no SDLT payable on the first £425,000 so long as the property does not cost more than £625,000.
Article VII. Alcohol
The planned increase in the duty rates for beer, cider, wine and spirits will be cancelled, let’s get down to the pub!
Article VIII. Low Tax Zones
Another spin on enterprise zones, low-tax zones will be set up across the UK. Will this stimulate growth or merely re-distribute the economy, it remains to be seen!
Article IX. Strike Action
Unions will be required to put pay offers to members during pay talks. Hopefully this means that the disruptions caused to the economy by strike action will now be limited.
If you would like to discuss the changes and how they will affect you and your business, please contact us.