U-TURN: Chancellor scraps plan to cut top rate of tax

KWARTENG: ‘WE GET IT – WE HAVE LISTENED’

Chancellor Rishi Sunak has annnounced a humiliating U-Turn on plans to slash the 45p top rate of tax for highest earners.

He tweeted this morning:

UK mini-budget a “huge gamble on health of economy”

SWINNEY SEEKS URGENT MEETING WITH CHANCELLOR

Deputy First Minister John Swinney and his counterparts from other devolved governments are seeking an urgent meeting with Chancellor of the Exchequer Kwasi Kwarteng to discuss immediate actions needed to reverse the damaging effects of the UK Government’s tax proposals.

Mr Swinney and the Finance Ministers from Wales and Northern Ireland are highlighting the profound impact of “the largest set of unfunded tax cuts for the rich in over 50 years” warning that it is “a huge gamble on public finances and the health of our economy”.

In a joint letter to Mr Kwarteng, they warn against being condemned to another decade of austerity and express deep concern over reports that UK Government departments will be asked to make spending cuts to balance the budget, which may have profound consequences for devolved budget settlements already eroded by inflation.

The Ministers also renew calls for the UK Government to provide targeted support for households and businesses, funded through a windfall tax on the energy sector. In addition, they call for Social Security benefits to be increased, and request additional resources for the devolved governments to protect public services and to fund public sector pay settlements.

Read the letter in full here.

Next steps in Kwarteng’s cunning plan

Chancellor moves to steady market panic

On Friday 23 September, the Chancellor of the Exchequer, the Rt Hon Kwasi Kwarteng MP, set out how the government would fulfil its commitment to cut taxes for people and businesses and announced wider supply side policies to grow the economy.

Building on this, as the much-criticised Growth Plan set out on Friday, Cabinet Ministers will announce further supply side growth measures in October and early November, including changes to the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure.

Next month, the Chancellor will, as part of that programme, outline regulatory reforms to ensure the UK’s financial services sector remains globally competitive.

He will then set out his Medium-Term Fiscal Plan on 23 November.

The Fiscal Plan will set out further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP in the medium term.

In the Growth Plan on Friday, the Chancellor set out that there would be an Office for Budget Responsibility forecast this calendar year. He has requested that the OBR sets out a full forecast alongside the Fiscal Plan, on 23 November.

As the Chief Secretary to the Treasury set out this weekend, the government is sticking to spending settlements for this spending review period.

The Chancellor also confirmed that there will be a Budget in the Spring, with a further OBR forecast.

The £ has continued to trade down against both the dollar and the Euro following the Chancellors announcement on Friday.

A new YouGov opinion poll suggests the Tories now trail Labour by 17 points. There is even talk of a vote of no confidence in Prime Minister Liz Truss, who has been in post for just three weeks. A remarkable achievement.

Going for growth? Implications of the UK government’s Growth Plan

‘a big gamble with long odds‘

FRIDAY’S ‘fiscal event’ contained some of the most substantial tax policy changes seen in recent decades (writes Fraser of Allander’s DAVID EISER). Combined with last week’s announcements on the Energy Price Guarantee and Energy Bill Relief Scheme, this constitutes a huge change in the fiscal outlook.

In this context, the decision not to involve the Office for Budget Responsibility (OBR) is irresponsible. It might be billed as a ‘Growth Plan’, but today’s announcements are a budget in all but name. The OBR plays an essential role in scrutinising tax and spend forecasts, assessing the likely impact of policy announcements on growth, the deficit and debt. Its exclusion from the process weakens transparency around the impacts of the proposals.

The new Chancellor (above) used the first part of his speech to reiterate the government’s unavoidably large interventions in the energy market to protect households and businesses from energy price rises. In the remainder of the speech he announced a host of measures designed to stimulate economic growth through a combination of tax cuts and regulatory changes.

Tax changes – implications in Scotland

There were two ‘tax cuts’ that are more accurately described as reversals in recent or planned increases.

A planned increase in the Corporation Tax rate from 19% to 25% will now not go ahead. The Treasury estimates this will cost £12bn in reduced revenue compared to its previous plans in 2023/24, and more in subsequent years.
The Health and Social Care Levy has also been scrapped, together with the 1.25% increase in dividend tax rates. These changes will cost almost £18bn in reduced revenues in 2023/24 compared to previous plans.

Both of these changes had been pre-announced and apply UK-wide.

The big surprises came on income tax. Here the government announced the biggest reforms (at UK level) since 2009.

The basic rate will be reduced from 20p to 19p one year earlier than expected, applying from April 2023 rather than April 2024.
The 45p additional rate will be abolished in April 2023.

Income tax changes and implications for Scotland

Of course, with income tax being devolved, neither of the changes will apply in Scotland. Instead, the Scottish Government will see a smaller reduction in its block grant next year than it was expecting, boosting the resources available to it in 2023/24 (the reduction to the Scottish Government’s block grant is broadly designed to reflect what the UK government would have raised from income tax in Scotland if income tax had not been devolved, and if the UK government income tax policy had continued to apply in Scotland).

In the context of this additional resource through its block grant, the Scottish Government will then need to decide whether and how to respond through its own tax policy.

It could of course keep Scottish tax policy unchanged. This would enable it to use its additional block grant to invest in public services in Scotland. The cost of it doing this politically would be that the gap between Scottish and rUK tax policy would widen substantially. Almost all Scottish income taxpayers would pay more income tax than they would in rUK. A Scottish taxpayer with an income of £29,000 would face liabilities around £160 higher. A Scottish taxpayer with an income of £50,000 would face liabilities almost £2,000 higher (Chart 1, black line).

Chart 1: Potential difference in income tax liability between Scotland and rUK, in 2023/24

Alternatively the Scottish government could mirror UK tax cuts with tax cuts of its own. It could for example decide to reduce the starter, basic and intermediate rates by 1p. This would broadly retain the difference in tax liability for individuals between Scotland and rUK at current levels (Chart 1, grey line). It would allow the Scottish Government to retain its treasured mantra that ‘the lowest income half of Scottish taxpayers pay less tax than they would in rUK’. But such a policy would cost the Scottish government around £400m in foregone revenues.

Other policy decisions are possible. The Scottish government could decide to cut just the starter and basic rates in Scotland, rather than the intermediate rate as well, at a revenue cost of around £250m.

How the Scottish Government responds to the UK Government’s abolition of the Additional Rate will also be interesting. The Scottish Fiscal Commission is likely to forecast that abolition of the Additional Rate wouldn’t be extremely costly in revenue terms (there are expected to be around 22,000 Additional Rate taxpayers in Scotland in 2023/24 so charging them a few pence less tax on their income above £150k might not have a significant affect in aggregate, particularly if it is assumed, as the SFC will, that the tax reduction will induce some element of a positive behavioural response).

The Additional Rate policy therefore puts the Scottish Government in a difficult political position. If it retains the Additional Rate it will be accused of undermining the ‘competitiveness’ of the Scottish economy, for little direct revenue gain (without any changes to existing policy, a taxpayer with an income of £200,000 would face an additional £5,900 in income tax liabilities in Scotland compared to an equivalent taxpayer in England).

But abolition of the Additional Rate would provide a significant tax cut for the highest income 0.5% of the Scottish adult population (an individual with income of £200,000 would be better off to the tune of £2,500 if the Additional Rate is abolished). The regressivity of a cut to the top rate in Scotland is difficult to reconcile with the Scottish Government’s aspirations for progressivity.

Stamp Duty changes and implications for Scotland

The Chancellor also announced changes to Stamp Duty in England and NI, amounting to an increase in the threshold at which Stamp Duty applies to residential transactions.

As with income tax, these changes will not apply in Scotland. As with income tax, the changes to English policy will pose dilemmas for the Scottish Government when considering its policy on the Land and Buildings Transaction Tax.

The Scottish Government has until now set LBTT in such a way that homes sold in Scotland for less than around £335,000 pay less tax than an equivalent property in England. Above this price, transactions in Scotland face noticeably higher tax liabilities. The changes announced by the UK government today mean that – if there are no changes to the existing Scottish LBTT rates – all property transactions in Scotland would face higher tax liabilities than they would in England (see Chart 2).

The Stamp Duty cuts in England will generate some additional resources for the Scottish Government via its block grant. In ballpark terms the increase in resource might be around £80m. It could use this additional resource to fund public services, or to cut LBTT rates in order to maintain existing tax differentials.

Chart 2: Residential property transactions tax liabilities in Scotland and England

Investment zones – an option for Scotland but at what cost?

The UK government announced the establishment of several dozen ‘investment zones’. It is hoped that these zones will ‘drive growth and unlock housing… by lowering taxes and liberalising planning frameworks’.

Policies implemented within the investment zones will include business rate reliefs for newly occupied or expanded premises, and stamp duty relief on land bought for commercial purposes, and a zero-rate of employer National Insurance Contributions for new employees earning below £50,270.

The hoped-for impacts of these investment zones on UK-wide economic activity – as opposed to their effect on displacing economic activity within parts of the UK – is based more on hope than on empirical evidence.

Several dozen potential zones have been identified in England. The UK government says that it will work with the Scottish government and local authorities to identify zones in Scotland.

What is not yet clear is how the costs of investment zones in Scotland – in the form of reliefs on business rates and stamp duty (which are devolved) and NICs reliefs (which are not devolved) – will be distributed between the Scottish and UK governments. The Treasury’s costing document does not seem to give an indication of the funding associated with the planned investment zones in England, so it is difficult to get a sense of the fiscal scale of these interventions at this stage.

U-turn on IR35

In another regulatory reform design to unlock growth, the chancellor announced the repeal of the anti-avoidance legislation commonly known as IR35. This legislation was designed to reduce so-called “disguised employment”, whereby workers could work long-term for businesses as self-employed contractors rather than employees – and in so-doing reduce the tax liabilities faced by both themselves and the company that they were contracted to.

The IR35 regulations were introduced for public authorities in 2017, and for medium and large enterprises in 2021. The regulation has big impacts on the nature and shape of the workforce in particular sectors.

The introduction of IR35 has been a huge undertaking by public authorities and corporations to ensure compliance with the legislation, so the change announced today is a big deal. It is a shame that we don’t have the view of the OBR of the impact this could have on Income Tax and National Insurance Contributions: but the costing published today by the Treasury suggests it could cut tax receipts by £1.1 billion in 2023-24, rising to £2 billion by 2026-27.

The Energy profits levy – the existing windfall tax

Interestingly, although the Prime Minister has made it clear that additional windfall taxes were not going to be introduced on oil and gas companies, we need to remember that the Energy Profits Levy announced in May is still in place.

This is a 25% additional surcharge on the extraordinary profits that are being made by the oil and gas companies. When it was announced in May, it was expected that this could raise £5 billion this year, although there was a great deal of uncertainty about this.

Under current plans this levy will remain in place until December 2025, and on the basis of the costings published today, the Government has no plans to end it early. The policy is now forecast to raise £28 billion over the next 4 years (including this year). This is another area of costing that it would be particularly useful to get independent scrutiny from the OBR.

Summary: a gamble on growth with long odds

It is undeniably the case that the UK (and Scottish) economies have been characterised for the last 15 years by very weak growth. This has resulted in stagnation in household incomes and living standards, and constrained the growth of government revenues – with implications for investment in public services.

It makes sense therefore for the government to put the objective to raise economic growth at the centre of its strategy. But setting a 2.5% annual growth target, as the UK government has done, is much easier said than achieved.

The government’s decision to reverse the Health and Social Care Levy and cancel the planned Corporation Tax increases merely take policy back to where it has been in the recent past. It is a return to orthodoxy rather than a break from the norm, and in this sense it is difficult to see that it will make any difference to growth.

The substantial cuts to income tax do represent a bigger change to existing policy. But the hope that these will stimulate the economy is based more on blind faith than on any tangible evidence. There is no evidence internationally that countries with lower tax rates grow more quickly. Historically, UK growth rates were highest when tax rates were higher.

Whether today’s announcements unleash economic growth remains very much to be seen. Strikingly, what there was no mention of today was any plans for additional public sector investment. Despite the government’s rhetoric about reforming the ‘supply-side’ of the economy, there was little mention of the role that the skills and health of the population play in influencing the capacity of the economy to grow.

Whilst the government seems comfortable borrowing an additional £30bn or so a year to fund the tax cuts announced today, and is apparently relaxed about an over-growing burden of national debt, the path set out today will constrain the government’s room for manoeuvre on investment in public services in coming years.

At a time when parts of the public sector are struggling to deal with the legacy of the pandemic and other longstanding challenges, the implied prioritisation of tax cuts over public services investment will prove highly contentious, particularly given the regressivity of the cuts.

Households in the top 10% of the income distribution in Scotland will be better off by around £24 per week on average as a result of the cancellation of the Health and Social Care Levy, whereas those in the middle of the distribution will be only £4 per week.

The hope that the policies announced on Friday will boost growth and hence revenues despite cuts in tax rates is a big gamble with long odds.

Chancellor announces new Growth Plan with biggest package of tax cuts in generations

ROBIN HOOD IN REVERSE, says TUC

The Chancellor today (Friday 23 September) unveiled his Growth Plan to release the huge potential in the British economy by tackling high energy costs and inflation and delivering higher productivity and wages.

Chancellor unveils new growth plan, tackling energy costs to bring down inflation, backing business and helping households.
Corporation tax rise cancelled, keeping it at 19% as government sets sights on 2.5% trend rate of growth.
Basic rate of income tax cut to 19% in April 2023 – one year earlier than planned – with 31 million people getting on average £170 more per year.
Stamp Duty cuts will help people on all levels of the property market and lift 200,000 homebuyers every year out of paying the tax altogether.

The plan set the ambitious target for 2.5% trend of growth, securing sustainable funding for public services and improving living standards for everyone.

The Chancellor of the Exchequer, Kwasi Kwarteng, said: “Economic growth isn’t some academic term with no connection to the real world. It means more jobs, higher pay and more money to fund public services, like schools and the NHS.

“This will not happen overnight but the tax cuts and reforms I’ve announced today – the biggest package in generations – send a clear signal that growth is our priority.

“Cuts to stamp duty will get the housing market moving and support first-time buyers to put down roots. New Investment Zones will bring business investment and release land for new homes in communities across the country. And we’re accelerating new road, rail and energy projects by removing restrictions that have slowed down progress for too long.

“We want businesses to invest in the UK, we want the brightest and the best to work here and we want better living standards for everyone.”

Scottish Secretary Alister Jack said: “The Chancellor has set out an ambitious package of measures which will cut taxes and drive growth right across the UK.

“A strong economy is the best way to tackle the cost of living challenges we are all facing due to Russia’s invasion of Ukraine.

“Our ‘Plan for Growth’ will support households and businesses in Scotland, while driving economic growth to deliver jobs, investment and prosperity.

“The UK Government is delivering for the people of Scotland when it really matters.”

Setting out the first steps towards growth, Kwasi Kwarteng revealed a package of major cuts to Stamp Duty Land Tax, with the changes expected to increase additional residential investment, boost spending on household goods and support the hundreds of thousands of jobs in the property industry from removals companies to decorators.

The nil rate band will be doubled from £125,000 to £250,000, meaning that 200,000 more people every year will be able to buy a home without paying any Stamp Duty at all. The standard buyer in England will save £2,5000, meaning a typical family moving into a semi-detached property will save £2,500 on stamp duty and £1,150 on energy bills – and if they have a combined income of £50,000 around an additional £560 on tax. This is around £4,200 in total.

And the Government is going even further to support first time buyers, who will now pay no stamp duty up to £425,000, and increasing the value of the property on which first time buyers can claim relief, from £500,000 to £625,000. This tax cut took effect from midnight today (Friday 23 Sept 2022). The Chancellor also announced that he will further support homebuyers by increasing the disposal of surplus government land to build new homes, increasing supply.

The Chancellor also set out plans to tackle to the biggest drag on growth – the high cost of energy driven by Vladimir Putin’s invasion of Ukraine, which has driven up inflation. To tackle this the government’s Energy Price Guarantee will save the typical household £1,000 a year on their energy bill with the Energy Bill Relief Scheme halving the cost of business energy bills, reducing peak inflation by about 5 percentage points.

Also revealed today were major tax reforms to allow businesses to keep more of their own money, encouraging investment, boosting productivity and creating jobs. New measures include cancelling the planned rise in corporation tax, keeping it the lowest in the G20 at 19%, and reversing the 1.25 percentage point rise in National Insurance contributions, a change which will save 920,000 businesses almost £10,000 on average next year.

The Chancellor also announced more relief for businesses by making the Annual Investment Allowance £1 million permanently, rather than letting it return to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.

It was also confirmed that the government is in discussion with 38 local and mayoral combined authority areas in England including Tees Valley, South Yorkshire and West of England to set up Investment Zones in specific sites within their area.

Each Investment Zone will offer generous, targeted and time limited tax cuts for businesses and liberalised planning rules to release more land for housing and commercial development. These will be hubs for growth, encouraging investment in new shopping centres, restaurants, apartments and offices, and creating thriving new communities.

Revealing further tax reforms, Kwasi Kwarteng outlined sector specific support for pubs and hospitality, freezing alcohol duty for another year. Reforms to modernise alcohol duties will also be taken forward and the government will publish a consultation on these plans.

The new measures backing business come on top of the government’s Energy Bill Relief Scheme for businesses to cap costs per unit, which will protect them from soaring energy costs this winter by providing a discount on wholesale gas and electricity prices.

The Chancellor also reiterated the important principle of people keeping more of what they earn, incentivising work and enterprise. He announced a 1p cut to the basic rate of income tax one year earlier than planned.

From April 2023, the basic rate of income tax will be cut to 19% and will mean 31 million people will be better off by an average of £170 per year. Due to the combined impact of the reversal of the HSCL and the reduction of the Income Tax Basic Rate, someone working full time on the current National Living Wage will see a tax cut of over £100.

Alongside cutting the basic rate of income tax, the Chancellor also abolished the additional rate of tax, taking effect from April 2023. In its place will be a single higher rate of income tax of 40%. The policy removes the UK’s previous top rate tax, which was higher than countries like Norway, USA and Italy, and is designed to attract the best and the brightest to the UK workforce, helping businesses innovate and grow.

In a further move to grow the economy, the Chancellor announced plans to accelerate new roads, rail and energy infrastructure. In 2021 it took 65 per cent longer to get consent for major infrastructure projects than in 2012. New legislation will cut barriers and restrictions, making it quicker to plan and build new roads, speeding up the deployment of energy infrastructure like offshore wind farms and streamlining environmental assessments and regulations.

To further support businesses, the Chancellor announced new measures to unlock private investment. The Government will change regulations to increase investment by pension funds into UK assets, benefiting savers and boosting economic growth, and incentivising investment into Britain’s science and tech companies.

New measures were also announced to help people on low incomes secure more and better paid work. Universal Credit Claimants who earn less than the equivalent of 15 hours a week at National Living Wage will be required to meet regularly with their Work Coach and take active steps to increase their earnings or face having their benefits reduced.

This change is expected to bring an additional 120,000 people into the more intensive work search regime. Jobseekers over the age of 50 will also be given extra time with jobcentre work coaches, to help them return to the jobs market.

Rising economic inactivity in the over 50s is contributing to shortages in the jobs market, driving up inflation and limiting growth. Returning to pre-pandemic activity rates in the over 50s could boost the level of GDP by 0.5-1 percentage points.

The majority of announcements today are UK-wide, however the Scottish Government is expected to receive more than £600 million extra funding over the 2021 Spending Review period as a result of the changes to income tax and Stamp Duty Land Tax and the Welsh Government will receive around £70 million over the same period as a result of the change to Stamp Duty Land Tax.

The reversal of the Health and Social Care Levy will save 4.3 million people across Scotland, Wales and Northern Ireland more than £230 on average next year.

In the coming weeks, the Government will set out further details of plans to speed up digital infrastructure, reform business regulation, increase housing supply, improve our immigration system, make childcare cheaper, improve farming productivity and back our financial services.

The business community has welcomed the Chancellor’s announcement.

Martin McTague, National Chair of the Federation of Small Businesses said: “The Truss Government is off to a flying start. The Chancellor has delivered pro-small business measures today and has rightly recognised that removing taxes on jobs, investment and entrepreneurs is essential for our economy.

“Ministers need to be relentless in removing barriers to small business success – especially with the current headwinds. The Government has today signalled its determination to back small firms and we look forward to working with Ministers and departments to put in place measures to help small businesses grow and succeed.”

Amanda Tickel, Head of Tax and Trade Policy, Deloitte said: “This Budget will undoubtedly attract international attention.

“With the UK now retaining the lowest corporate profits tax rate in the G20, a maximum income tax rate of 40%, and extra incentives available in investment zones, the UK is on a stronger footing to compete for international investment.

Emma Jones CBE, Founder, Enterprise Nation said: “It’s bold, it’s agile and it’s speedy. Economists will be arguing for months to come, but small businesses will be waiting for the impact of this budget trickling down into their sales tonight.

“The new administration clearly set out its stall today and that it is firmly on the side of entrepreneurs and wealth creators. The tax cuts, both business and personal, will deliver confidence and unleash the entrepreneurial spirit that we know exists across the UK and to which the Chancellor referred so often.

“The UK’s small businesses have wanted growth acceleration but have had to be content with stagnation because of barriers to growth such as access to finance, business rates and employment complexity.

“The extension of EIS and SEIS and the pension charge cap reforms will be welcomed with open arms by the small business community, and we expect more start-ups to follow with an emphasis on supporting those who are 50+ to move from unemployment into self-employment. Thanks to the removal of IR35, many experienced individuals that left the employment market will now return.

“Our view for more than a decade has been that one of the most important things a government can do is to champion entrepreneurs and this morning’s statement and announcements most seriously deliver on that.”

Kate Nicholls, CEO of UKHospitality said: “The stated objectives of boosting growth and tackling inflation are a positive statement of intent to rightly put business at the heart of the Government’s agenda.

“We support the ambition for a globally competitive tax regime, to unleash entrepreneurship, growth and investment, and we look forward to working with the Chancellor to deliver that.

“Energy support and NIC measures will allow our businesses to better plan for a tough winter ahead. Today’s announcement included many positive measures that will bear fruit in due course, and we look forward to continuing to work closely with the Government on our immediate challenges.”

Tony Danker, CBI Director-General, said: “This is a turning point for our economy. Like Covid, the energy crisis has meant Government has had to spend massively to protect people and businesses. That means we have no choice but to go for growth to afford it.

“Today is day one of a new UK growth approach. We must now use this opportunity to make it count and bring growth to every corner of the UK. Fifteen years of anaemic growth cannot be repeated.

“Taking action to get Britain’s economy moving again by beginning construction on transport and green infrastructure projects shows immediate delivery. Planning reform is long overdue.

“A simpler, smarter approach to tax can pay dividends, and firms will be keen to make the most of the investment incentives on offer.

“It’s not perfect – it’s just the beginning – but there’s plenty business can work with. The Chancellor signalled more proposals to come this Autumn and these will be vital to sustain momentum on growth.”

Michelle Ovens CBE, Founder, Small Business Britain said: “The focus on entrepreneurship in today’s Growth Plan statement is good news for small businesses, and a hugely encouraging step towards supporting this key part of the economy in a tough financial climate.

“The energy plan already announced, cutting prices for small businesses and addressing some of the astronomical rises we have seen this summer, will give businesses some reassurance over the winter months, even if there are still questions over the long term plans.

“There is no doubt that rolling back national insurance rises, IR35 regulations and the planned corporation tax rise next year will be welcomed by small businesses and the business community more widely. In the medium to long term, this will support and encourage entrepreneurial growth, which is very welcome.

“However there remain serious challenges in the short term as entrepreneurs battle with rising costs across all areas of the business, not just in energy and tax. Finance, input prices, export and staffing all remain challenging and we continue to see businesses failing at a high rate with little to fall back on after a very difficult few years.

“More will need to be done at all levels of society and government to ensure the 5.6 million small businesses in the UK can weather this winter and make the most of the supportive policies announced today.

“The direction of travel is absolutely right for small businesses. This now needs to be delivered by us all.”

Nicolas Burquier, Managing Director of Pizza Hut Europe said: “It’s great to see Government has acknowledged and is acting on the significant pressures facing the UK hospitality sector as a result of the rise in global inflation.

“Combined with the recently announced support on energy bills, the tax changes and Investment Zones unveiled today, all will offer some respite for many hard-pressed restaurants and takeaway owners like our franchisees.

“We look forward to continuing to work with the Government to ensure that hospitality receives the sustained support it requires as the sector looks to recover from current setbacks.”

Dr Liz Cameron CBE, Director & Chief Executive, Scottish Chambers of Commerce said: “The Chancellor’s commitment to pro-growth and pro-enterprise policies will be eagerly welcomed by businesses. The specifics on reducing business costs, cutting red tape and boosting infrastructure development are exactly the levers the UK Government should be pulling to support economic growth.

“The plans for Investment Zones strike an ambitious tone but these plans must provide equitable benefits to the UK nations ensuring new economic activity is generated, not simply displaced from one location to another. Similarly, fixing the complex and burdensome planning system must be a joint priority for both the Scottish and UK Government if we are to attract investors.

“As we look ahead to the Scottish Government’s emergency budget, businesses and households now play the waiting game to see if the Scottish Government opts to take similar moves. With control of powers such as income tax and land & buildings transaction tax devolved to Scotland, the expectation will be for Scottish Government to deliver parity with the rest of the UK. Divergence between the nations risks dampening business and investor confidence.

“The string of policy announcements from the Chancellor signal a bold start. As firms continue to navigate unprecedented challenges in the economy, consistent collaboration and partnership will be essential between both governments and the business community if we are to move from survival to growth.”

Stephen Phipson, Chief Executive, Make UK said: “The Chancellor has clearly recognised that we are heading for very stormy waters in the face of eyewatering increases in energy and other costs, together with a difficult international environment.

“Industry will welcome today’s statement which, coming on the back of the support for energy, contains a number of positive measures to help shield viable companies from the worst impact of escalating costs and help protect jobs. The focus on prioritising growth with plans to speed up planning reforms, boost infrastructure and investment is especially welcome.

“However, this is the sixth growth plan in little over a decade which has seen ever increasing political uncertainty. This has resulted in zero certainty for business, the most important thing it needs. Government must try and reverse this process by working with industry to develop a long-term economic strategy together with a National Manufacturing Plan.

“At its heart must be a properly designed tax system and a certainty of policy that aims to transform the low level of business investment, develops the workforce of the future and equips people with the digital skills they will need in the new industries and technologies which are rapidly emerging.

“Given the tools and, the right economic environment, industry can help itself and, at the same time, help the Government meet its growth target. Now is the time to end to put in place the right building blocks for the long-term.”

Emma McClarkin, Chief Executive of the British Beer and Pub Association, said: “We welcome the steps taken by the Government in the Chancellor’s fiscal statement. The measures announced today will mean a boost of £500m for our sector, enabling growth following successive crises and allowing us to thrive in the future.

“Coupled with this week’s intervention on energy bills, these commitments will make a significant difference to our pubs and brewers at an acutely difficult time.

“The Chancellor’s plans show that the Government recognises how extreme the cost of doing business has become and the enormous investment our sector makes, not only in the economy, but to the social fabric of communities across the breadth of the UK and why it must be protected. We look forward to the continued reduction of taxation on the sector at the next Budget – the need for a reduced VAT rate for hospitality and business rates reliefs remain as strong as ever.

“We will continue to work with the Government to ensure that reforms to the draft beer duty rates are brought forward as soon as possible, meaning that our pubs and brewers can contribute to, and be at the heart of villages, towns and cities for many years to come.”

Shevaun Havilland, Director General of the British Chambers of Commerce said: “Businesses will welcome many of the measures announced today that should boost economic growth, relieve cost pressures and encourage investment.

“The announcement to reverse the increase to National Insurance Contributions (NIC) is a big win for the British Chambers of Commerce and the business community. This is much needed support for companies during these difficult times.

“Firms will also be glad to see the Annual Investment Allowance made permanent. It is a crucial tool which gives them the confidence to push ahead with investment, and will add greater certainty to their plans, now we know it is guaranteed to remain.

“Business wants to create the wealth that funds Government spending, and plans for Investment Zones, and steps to encourage new funding in our growth industries have the potential to do just that.

“Investment Zones could also finally deliver on the Government’s long-standing promise to level up, if the scheme is truly UK-wide. But lessons must be learned from the past, otherwise they can simply displace growth and investment from one area to another without creating new economic activity.

“This is a bold start, and we now await further detail on the further reforms the Treasury announced, to see if this will develop into a comprehensive long-term economic strategy.

“All eyes will also now turn to the forecasts by the Office of Budget Responsibility in the autumn for reassurance on public finances.”

TUC: ‘ROBIN HOOD IN REVERSE’

Union body attacks Liz Truss for holding down wages while lining bankers’ pockets – “The party of pay cuts strikes again.”
Fresh attack on right to strike is “designed to hold down pay”

Responding to today’s ‘mini budget’, which announced tax cuts for corporations and the wealthy, but no help to get wages rising in the current cost of living crisis, TUC General Secretary Frances O’Grady said: “This budget is Robin Hood in reverse.

“We should be rewarding work, not wealth. But at the first opportunity, Liz Truss is holding down wages and lining the pockets of big corporations and City bankers. The party of pay cuts strikes again.

“We need a very different plan in the full autumn budget to do right by workers. The Chancellor should boost the minimum wage, universal credit and pensions before winter sets in.

“He should fund pay rises in the public sector that keep up with prices. And ministers should extend collective pay bargaining rights across the economy so that whatever your job, you can negotiate a fair pay rise.”

On restrictions on the right to strike, she added: “Nobody takes the decision to strike lightly. But the right to strike to defend pay and conditions is a fundamental British freedom.

“And it’s the last line of defence against employers who refuse to negotiate fair pay. These new restrictions are unworkable, very likely illegal and designed to hold down pay across the economy.”

On support with energy costs and the government’s rejection of calls for a higher windfall tax, she added: “Ministers are letting oil and gas giants use Britain like a cash machine with no withdrawal limit.

“We need a much higher windfall tax on greedy energy companies to protect families from profiteering. That could fund free home improvements so that families don’t lose money by leaking heat from their homes.”

The TUC’s submission to the Treasury in advance of today’s mini budget called for the following actions:

Bring forward inflation proof increases in the minimum wage, universal credit and pensions to October to help families through the cost-of-living emergency.
Get the minimum wage on a path to £15 an hour as soon as possible.
Give public service staff a real-terms pay rise that at least matches the rising cost of living and begins to restore earnings lost over the last decade.
Strengthen and extend collective bargaining across the economy, including introducing fair pay agreements to set minimum pay across whole sectors.
Impose a larger windfall tax on oil and gas companies that that are profiteering from UK families.
Make sure everyone pays their fair share of taxes by going ahead with increases in corporate tax, and equalising capital gains tax rates with income tax as a first step to fair taxes on wealth.

Chancellor’s measures fail to target support

Deputy First Minister says statement is ‘cold comfort for many’

The Chancellor’s fiscal statement and package of announcements targets the most wealthy, shifting further pressure onto the shoulders of those on the lowest incomes, Deputy First Minister John Swinney has said.

Reacting to the statement, Mr Swinney expressed his disappointment that while many households across Scotland are already struggling to pay their bills and heat their homes, the measures offer tax cuts for corporations and bankers.

The Deputy First Minister said: “The Chancellor’s statement today will provide cold comfort to the millions of people across Scotland who have been looking for the UK Government to use its reserved powers to provide support for those that need it most. Instead we get tax cuts for the rich and little for those who need it most.

“We estimate that the increase in the price cap to £2,500 will force an estimated 150,000 more Scottish households into extreme fuel poverty. Instead of offering these people support, the Chancellor is threatening to cut their family budgets further, with a new regime of benefit sanctions.

“On Land and Buildings Transaction Tax and on Scottish income tax, the Scottish Government will set out its plans as part of the normal budget process. We will discuss the proposed investment zones with the UK Government but we are clear they have to be the right fit for Scotland.

“Because of inflation, the Scottish Government’s budget is worth £1.7 billion less than it was when we set it in December, yet the Chancellor has refused to provide a single additional penny for public services or increase public sector pay.

“We are doing everything within our power to support people, public services and the economy, but these efforts are under threat by a reckless UK Government beginning a new, and dangerous race to the bottom. With a fixed Budget and no scope to borrow for short term challenges, Scotland is at the mercy of UK decisions. This reinforces the urgent need for independence.”

Factsheets on each of the major measures can be found here:

The full document can be found here.

The Growth Plan 2022 speech

The Growth Plan speech delivered by Chancellor Kwasi Kwarteng:

Mr Speaker,

Let me start directly with the issue most worrying the British people – the cost of energy.

People will have seen the horrors of Putin’s illegal invasion of Ukraine.

They will have heard reports that their already-expensive energy bills could reach as high as £6,500 next year.

Mr Speaker, we were never going to let this happen.

The Prime Minister has acted with great speed to announce one of the most significant interventions the British state has ever made.

People need to know that help is coming.

And help is indeed coming.

We are taking three steps to support families and businesses with the cost of energy.

Firstly, to help households, the Energy Price Guarantee will limit the unit price that consumers pay for electricity and gas.

This means that for the next two years, the typical annual household bill will be £2,500.

For a typical household, that is a saving of at least £1,000 a year, based on current prices.

We are continuing our existing plans to give all households £400 off bills this winter.

So taken together, Mr Speaker, we are cutting everyone’s energy bills by an expected £1,400 this year.

And millions of the most vulnerable households will receive additional payments, taking their total savings this year to £2,200.

Secondly, as well as helping people, we need to support the businesses who employ them.

The Energy Bill Relief Scheme will reduce wholesale gas and electricity prices for all UK businesses, charities, and the public sector like schools and hospitals.

This will provide a price guarantee equivalent to the one provided for households, for all businesses across the country.

Thirdly, energy prices are extremely volatile, erratically rising and falling every hour.

This creates real risks to energy firms who are otherwise viable businesses.

Those firms help supply the essential energy needed by households and businesses.

So to support the market, we are announcing the Energy Markets Financing Scheme.

Delivered with the Bank of England, this scheme will provide a 100% guarantee for commercial banks to offer emergency liquidity to energy traders.

Mr Speaker,

The consensus amongst independent forecasters is that the Government’s energy plan will reduce peak inflation by around 5 percentage points.

It will reduce the cost of servicing index-linked government debt and lower wider cost of living pressures.

And it will help millions of people and businesses right across the country with the cost of energy.

Let no one doubt: during the worst energy crisis in generations, this Government is on the side of the British people.

The Bank of England are taking further steps to control inflation, acting again only yesterday.

I can assure the House, this Government considers the Bank of England’s independence to be sacrosanct.

And we remain closely coordinated, with the Governor and myself speaking twice a week.

But Mr Speaker,

High energy costs are not the only challenge confronting this country.

Growth is not as high as it should be.

This has made it harder to pay for public services, requiring taxes to rise.

In turn, higher taxes on capital and labour have lowered returns on investment and work, reducing economic incentives and hampering growth still further.

This cycle has led to the tax burden being forecast to reach the highest levels since the late 1940s – before even Her Late Majesty acceded to the throne.

We are determined to break that cycle.

We need a new approach for a new era, focused on growth.

Our aim, over the medium term, is to reach a trend rate of growth of 2.5%.

And our plan is to expand the supply side of the economy through tax incentives and reform.

That is how we will deliver higher wages, greater opportunities, and crucially, fund public services, now and into the future.

That is how we will compete successfully with dynamic economies around the world.

That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth.

So as a Government, we will focus on growth – even where that means taking difficult decisions.

None of this is going to happen overnight. But today we are publishing our Growth Plan that sets out a new approach for this new era, built around three central priorities:

Reforming the supply-side of the economy.
Maintaining responsible approach to public finances
And cutting taxes to boost growth.

Mr Speaker,

The UK has the second-lowest debt to GDP ratio of any G7 country.

In due course, we will publish a Medium-Term Fiscal Plan, setting out our responsible fiscal approach more fully.

Including how we plan to reduce debt as a percentage of GDP over the medium term.

And the OBR will publish a full economic and fiscal forecast before the end of the year, with a second to follow in the new year.

Fiscal responsibility remains essential for economic confidence, and it is a path we remain committed to.

Today we are publishing costings of all the measures the Government has taken.

And those costings will be incorporated into the OBR’s forecast in the usual way.

The House should note that the estimated costs of our energy plans are particularly uncertain, given volatile energy prices.

But based on recent prices, the total cost of the energy package, for the six months from October, is expected to be around £60bn.

We expect the cost to come down as we negotiate new, long term energy contracts with suppliers.

And, in the context of a global energy crisis, it is entirely appropriate for the government to use our borrowing powers to fund temporary measures in order to support families and businesses.

That’s what we did during the Covid-19 pandemic.

A sizeable intervention was right then…and it is right now.

The heavy price of inaction would have been far greater than the cost of these schemes.

Mr Speaker,

We are at the beginning of a new era.

As we contemplate this new era, we recognise that there is huge potential in our country.

We have unbounded entrepreneurial drive.

We have highly skilled people.

We have immense global presence in sectors like finance, life sciences, technology, and clean energy.

But Mr Speaker, there are too many barriers for enterprise. We need a new approach to break them down. That means reforming the supply side of our economy.

Over the coming weeks, my Cabinet colleagues will update the House on every aspect of our ambitious agenda.

Those updates will cover: the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure.

And Mr Speaker, we start this work today.

An essential foundation of growth is infrastructure.

The roads, railways, and networks that carry people, goods, and information all over our country.

Today, our planning system for major infrastructure is too slow and fragmented.

The time it takes to get consent for nationally significant projects is getting slower, not quicker, while our international competitors forge ahead.

We have to end this.

We can announce that in the coming months, we will bring forward a new Bill to unpick the complex patchwork of planning restrictions and EU-derived laws that constrain our growth.

We will streamline a whole host of assessments, appraisals, consultations, endless duplications, and regulations.

We will also review the government’s business case process to speed up decision making.

And today, we are publishing a list of infrastructure projects that will be prioritised for acceleration, in sectors like transport, energy, and telecoms.

And, to increase housing supply and enable forthcoming planning reforms, we will also increase the disposal of surplus government land to build new homes.

Mr Speaker, we are getting out of the way to get Britain building.

Mr Speaker,

One of the proudest achievements of our government is that unemployment is at the lowest level for nearly fifty years.

But with more vacancies than unemployed people to fill them, we need to encourage people to join the labour market.

We will make work pay by reducing people’s benefits if they don’t fulfil their job search commitments.

We’ll provide extra support for unemployed over-50s.

And we’ll ask around 120,000 more people on Universal Credit to take active steps to seek more and better paid work, or face having their benefits reduced.

And, Mr Speaker,

At such a critical time for our economy, it is simply unacceptable that strike action is disrupting so many lives.

Other European countries have Minimum Service Levels to stop militant trade unions closing down transport networks during strikes.

So we will do the same.

And we will go further.

We will legislate to require unions to put pay offers to a member vote, to ensure strikes can only be called once negotiations have genuinely broken down.

Of course, Mr Speaker, to drive growth, we need new sources of capital investment.

To this end, I can announce that we will accelerate reforms to the pension charge cap so that it will no longer apply to well-designed performance fees.

This will unlock pension fund investment into UK assets and innovative, high growth businesses.

It will benefit savers and increase growth.

And, we will provide up to £500 million to support new innovative funds and attract billions of additional pounds into UK science and technology scale-ups.

And Mr Speaker, this brings me to the cap on bankers’ bonuses.

A strong UK economy has always depended on a strong financial services sector.

We need global banks to create jobs here, invest here, and pay taxes here in London, not Paris, not Frankfurt, not New York.

All the bonus cap did was to push up the basic salaries of bankers, or drive activity outside Europe.

It never capped total remuneration, so let’s not sit here and pretend otherwise.

So we’re going to get rid of it.

And to reaffirm the UK’s status as the world’s financial services centre, I will set out an ambitious package of regulatory reforms later in the Autumn.

But Mr Speaker,

To support growth right across the country, we need to go further, with targeted action in local areas.

So today, I can announce the creation of new investment zones.

We will liberalise planning rules in specified agreed sites, releasing land and accelerating development.

And we will cut taxes.

For businesses in designated tax sites, for ten years, there will be:

Accelerated tax reliefs for structures and buildings.

And 100% tax relief on qualifying investments in plant and machinery.

On purchases of land and buildings for commercial or new residential development, there will be no stamp duty to pay whatsoever.

On newly occupied business premises, there will be no business rates to pay whatsoever.

And if a business hires a new employee in the tax site, then on the first £50,000 they earn…

…the employer will pay no National Insurance whatsoever.

That is an unprecedented set of tax incentives for business to invest, to build, and to create jobs right across the country.

I can confirm for the House that we’re in early discussions with nearly 40 places like Tees Valley, the West Midlands, Norfolk and the West of England to establish Investment Zones.

And we’ll work with the devolved administrations and local partners to make sure Scotland, Wales and Northern Ireland will also benefit, if they are willing to do so.

If we really want to level up, Mr Speaker – we have to unleash the power of the private sector.

And now, Mr Speaker, we come to tax – central to solving the riddle of growth.

The tax system is not simply about raising revenue for public services, vitally important though that is. Tax determines the incentives across our whole economy.

And we believe that high taxes reduce incentives to work, they deter investment and they hinder enterprise.

As the Prime Minister has said, we will review the tax system to make it simpler, more dynamic, and fairer for families.

And we are taking that first step today.

Mr Speaker,

The interests of businesses are not separate from the interest of individuals and families.

In fact, it is businesses that employ most people in this country.

It is businesses that invest in the products and services we rely on.

Every additional tax on business is ultimately passed through to families through higher prices, lower pay, or lower returns on savings.

So I can therefore confirm that next year’s planned increase in Corporation Tax will be cancelled.

The UK’s corporate tax rate will not rise to 25% – it will remain at 19%.

We will have the lowest rate of Corporation Tax in the G20.

This will plough almost £19bn a year back into the economy.

That’s £19bn for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions.

I’ve already taken steps elsewhere in this statement to support financial services, so the Bank Surcharge will remain at 8%.

But, Mr Speaker, we will do more to encourage private investment.

The Annual Investment Allowance, which gives 100% tax relief on investments in plant and machinery, will not fall to £200,000 as planned…

It will remain at £1m.

And it will do so permanently.

Our duty is to make the UK one of the most competitive economies in the world – and we are delivering.

And Mr Speaker,

We want this country to be an entrepreneurial, share-owning democracy.

The Enterprise Investment Scheme. The Venture Capital Trusts. We will extend them beyond 2025.

The Seed Enterprise Investment Scheme. Company Share Option Plans. We will increase the limits to make them more generous.

Crucial steps on the road to making this a nation of entrepreneurs.

Mr Speaker,

For the tax system to favour growth, it needs to be much simpler.

I’m hugely grateful to the Office of Tax Simplification for everything they have achieved since 2010.

But instead of a single arms-length body which is separate from the Treasury and HMRC, we need to embed tax simplification into the heart of Government.

That is why I have decided to wind down the Office of Tax Simplification, and mandated every one of my tax officials to focus on simplifying our tax code.

To achieve a simpler system, I will start by removing unnecessary costs for business.

Firstly, we will automatically sunset EU regulations by December 2023, requiring departments to review, replace or repeal retained EU law.

This will reduce burdens on business, improve growth, and restore the primacy of UK legislation.

Mr Speaker, we can also simplify the IR35 rules – and we will.

In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses.

So, as promised by My RHF the Prime Minister, we will repeal the 2017 and 2021 reforms.

Of course, we will continue to keep compliance closely under review.

Mr Speaker,

Britain welcomes millions of tourists every year, and I want our high streets and airports, our ports and our shopping centres, to feel the economic benefit.

So we have decided to introduce VAT-free shopping for overseas visitors.

We will replace the old paper-based system with a modern, digital one.

And this will be in place as soon as possible.

This is a priority for our great British retailers – so it is our priority, too.

Our drive to modernise also extends to alcohol duties.

I have listened to industry concerns about the ongoing reforms.

I will therefore introduce an 18-month transitional measure for wine duty.

I will also extend draught relief to cover smaller kegs of 20 litres and above, to help smaller breweries.

And, at this difficult time, we are not going to let alcohol duty rates rise in line with RPI.

So I can announce that the planned increases in the duty rates for beer, for cider, for wine, and for spirits will all be cancelled.

Now, Mr Speaker, we come to the question of personal taxation.

It is an important principle that people should keep more of the money they earn. And it is 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.

The increase in Employer National Insurance Contributions and dividends tax… will be cancelled.

And the interim increase in the National Insurance rate, brought in for this tax year…will be cancelled.

And this cut will take effect from the earliest possible moment, November 6th.

Reversing the Levy delivers a tax cut for 28 million people, worth, on average, £330 every year;

A tax cut for nearly a million businesses;

And I can confirm: the additional funding for the NHS and social care services will be maintained at the same level.

Mr Speaker,

I have another measure.

Today’s statement is about growth.

Home ownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society.

So to support growth, increase confidence, and help families aspiring to own their own home, I can announce that we are cutting stamp duty.

In the current system, there is no stamp duty to pay on the first £125,000 of a property’s value.

We are doubling that – to £250,000.

First time buyers currently pay no stamp duty on the first £300,000.

We’re increasing that threshold as well, to £425,000.

And we’re going to increase the value of the property on which first time buyers can claim relief, from £500,000 to £625,000.

The steps we’ve taken today mean 200,000 more people will be taken out of paying stamp duty altogether.

This is a permanent cut to stamp duty, effective from today.

And Mr Speaker,

I have another measure.

High tax rates damage Britain’s competitiveness.

They reduce the incentive to work, invest, and start a business.

And the higher the tax, the more ways people seek to avoid them, or work elsewhere or simply work less…

…rather than putting their time and effort to more creative and productive ends.

Take the additional rate of income tax.

At 45%, it is currently higher than the headline top rate in G7 countries like the US and Italy.

And it is higher even than social democracies like Norway.

But I’m not going to cut the additional rate of tax today, Mr Speaker.

I’m going to abolish it altogether.

From April 2023, we will have a single higher rate of income tax of 40 per cent.

This will simplify the tax system and make Britain more competitive.

It will reward enterprise and work.

It will incentivise growth.

It will benefit the whole economy and whole country.

And, Mr Speaker, after all, this only returns us to the same top rate we had for 20 years.

And that’s not all.

I can announce today that we will cut the basic rate of income tax to 19p in April 2023 – one year early.

That means a tax cut for over 31 million people in just a few months’ time.

This means we will have one of the most competitive and pro-growth income tax systems in the world.

Mr Speaker,

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 that this 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.

And 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, Mr Speaker, to release the enormous potential of this country.

Our Growth Plan has delivered all those promises and more.

And I commend it to the House.

Chancellor to announce Growth Plan for ‘a new era for Britain’

Chancellor set to outline his vision for “a new era for Britain” focused on economic growth.
38 local and combined authorities in England in the running to establish new Investment Zones to get their local economies growing.
Kwasi Kwarteng is expected to announce new legislation to speed up the delivery of around 100 major infrastructure projects across the UK.

THE CHANCELLOR will today promise “a new era for Britain” focused on driving economic growth.

Kwasi Kwarteng will announce The Growth Plan – a major package of over 30 measures to tackle high energy bills, drive down inflation and cut taxes to drive growth, while maintaining responsible public finances.

Igniting growth by lowering taxes and cutting regulation is this government’s central mission – it will encourage business investment, drive growth, create jobs, improve living standards for everyone and promote confidence in the UK economy.

Speaking about his priorities in his speech to the House of Commons, the Chancellor of the Exchequer, Kwasi Kwarteng, is expected to say: “Growth is not as high as it needs to be, which has made it harder to pay for public services, requiring taxes to rise.

“This cycle of stagnation has led to the tax burden being forecast to reach the highest levels since the late 1940s.

“We are determined to break that cycle. We need a new approach for a new era focused on growth.

“That is how we will deliver higher wages, greater opportunities and sufficient revenue to fund our public services, now and into the future.

“That is how we will compete successfully with dynamic economies around the world.

“That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth.

“We will be bold and unashamed in pursuing growth – even where that means taking difficult decisions.

“The work of delivery begins today”.

The Chancellor will announce that the government is in discussion with 38 local and mayoral combined authority areas in England including West Midlands, Tees Valley, Somerset and Hull to set up new Investment Zones in specific sites within their area. These will be hubs for growth and are emblematic of the modern Britain that this government want to create.

Under a brand-new initiative, each Investment Zone will offer generous, targeted and time-limited tax cuts for businesses, backing them to increase productivity and create new jobs. This could encourage investment in new shopping centres, restaurants, apartments and offices – creating thriving new communities.

These areas will also benefit from further liberalised planning rules to release more land for housing and commercial development, and reforms to increase the speed of delivering development.

It will include reforms to environmental regulation and streamlined local and national planning policies, for example removing height restrictions on development, so that Investment Zones can bring forward more development – including housing and commercial sites – at the pace needed to boost growth.

Time-consuming negotiations between councils and developers for each project over affordable housing contributions will be scrapped. This will be replaced with a set percentage of affordable homes, whilst ensuring communities get the infrastructure they want and need.

Investment Zones will only be established with support from local leaders. The government will work closely with areas to develop tailored proposals that support their ambitions and deliver benefits for local residents.

The Government will work in partnership with Devolved Administrations and local partners in Scotland, Wales and Northern Ireland to deliver Investment Zones.

The Chancellor is expected to say: “The time it takes to get consent for nationally significant projects is getting slower, not quicker, while our international competitors forge ahead. We have to end this.

“To support growth right across the country, we need to go further, with targeted action in local areas.

“We will liberalise planning rules in specified agreed sites, releasing land and accelerating development.

“And we will cut taxes, with businesses in designated sites enjoying the benefit of generous tax reliefs”.

The Chancellor will also set out an ambitious package of measures, including new legislation, to accelerate the delivery of around 100 major infrastructure projects across the country. The Growth Plan also sets out the infrastructure projects that the government will prioritise for acceleration, across transport, energy, and digital infrastructure.

In 2021 it took 65 per cent longer to get consent for major infrastructure projects than in 2012, with not a single new nuclear-power station finished since 1995.

The development, consultation and consent for a large road scheme takes an average of 5 to 7 seven years, while some offshore wind farms can take up to 13 years from development to deployment and other projects require 34,000 pages of documentation.

The Norfolk Vanguard wind farm, a 1.8GW-wind farm project located in the off the coast of Norfolk that will power almost 2 million homes, took almost 4 years to go through just the planning stages and faced a legal challenge over the visual impact of the scheme delaying the development consent by a further year.

The Junction 10A of the M20, an international route which is used by large volumes of heavy goods and holiday traffic, took seven and a half years from the review of the preferred scheme to be granted planning permission due to delays in the planning system.

The Chancellor will set out plans to reverse this trend speeding up projects including new roads and railways, by reducing the burden of environmental assessments in the consultation process and reforming habitats and species regulations, driving the UK’s economic growth.

Legislation will be brought forward in the coming months to address barriers to delivery by reducing unnecessary burdens to speed up the delivery of vital infrastructure.

These reforms are part of the government’s effort to accelerate projects vital to securing our energy security, such as 6GW capacity of offshore wind power and support other nationally significant infrastructure such as Hinkley Point C and Sizewell C, A417 Air Balloon and Project Gigabit.

Drop false choice between the environment and the economy, urges CPRE

Commenting on the Chancellor’s mini-Budget, Sarah McMonagle, Acting Director of Campaigns and Policy at CPRE, the countryside charity, said: ‘This government needs to drop the false choice between the environment and the economy and get on with delivering the basic building blocks for thriving rural communities that have been neglected for too long.

“But sadly, the government seems hell bent on repeating the mistakes of the past rather than pursuing the policies rural communities really need in order to thrive.

‘If ministers want to see booming high streets in our market towns then they should be investing in a reliable and comprehensive bus network, not fast tracking road building schemes that have long since been proven not to deliver meaningful economic gains.

‘If ministers want to see more money in people’s pockets they should be delivering a massive programme of genuinely affordable homes not trying to bypass the democratic planning system.

‘If ministers want to keep business costs down, they should be making use of the 250,000 hectares of south facing commercial roofspace across the country to achieve a revolution in cheap domestically generated solar energy, not breaking manifesto commitments by trying to resurrect a fracking industry that will have no meaningful impact on wholesale gas prices.

‘The government’s plan to achieve growth by allowing businesses to trash the environment is a recipe for disaster that will ultimately leave rural communities poorer.’

National Insurance increase reversed

The 1.25 percentage point rise in National Insurance will be reversed from 6 November, Chancellor Kwasi Kwarteng has announced

April’s National Insurance increase to be reversed from November – delivering on key PM pledge to cut tax burden and promote economic growth
Health and Social Care Levy will be cancelled through Bill introduced today – Chancellor has confirmed funding for health and social care services will be protected and will remain at the same level as if the Levy were in place
Almost 28 million people will keep an extra £330 of their money on average next year, whilst 920,000 businesses are set to save almost £10,000 on average next year thanks to the change

Delivering on the Prime Minister’s pledge to slash taxes to help drive growth, scrapping the rise will reduce tax for 920,000 businesses by nearly £10,000 on average next year as they will no longer pay a higher level of employer National Insurance and can now invest the money as they choose.

The government will also cancel the planned Health and Social Care Levy – a separate tax which was coming into force in April 2023 to replace this year’s National Insurance rise.

This will help almost 28 million people across the UK keep more of what they earn, worth an extra £330 on average in 2023-24, with an additional saving of around £135 on average this year.

The Health and Social Care Levy (Repeal) Bill, legislating for the tax change, has been introduced into the House today. As part of the cancellation of the Levy, The Chancellor is also set to confirm that the increases to dividend tax rates will be scrapped from April 2023 in his Growth Plan tomorrow.

The increased dividend tax was introduced in April 2022 to ensure those who gained income from dividends contributed the same amount to help fund health and social care.

The Levy was expected to raise around £13 billion a year to fund health and social care. The Chancellor confirmed today that the funding for health and social care services will be maintained at the same level as if the Levy was in place, protecting the NHS through the winter and ensuring long-term investment in social care.

Chancellor of the Exchequer Kwasi Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.

“Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the Levy will help them grow, whilst also allowing the British public to keep more of what they earn.”

The previous government decided to raise National Insurance by 1.25 percentage points in April 2022 to fund health and social care. The rate was due to return to 2021-22 levels in April 2023, when a separate new 1.25% Health and Social Care Levy was due to take effect. Today’s legislation reverses the rise from earlier this year and cancels next year’s introduction of the Levy.

This is part of the government’s pro-growth agenda, backing business to invest, innovate and create jobs and helping raise living standards for everyone across the UK.

920,000 businesses will see a cut in National Insurance bills, with 20,000 taken out of paying National Insurance entirely due to the Employment Allowance, which rose in April 2022 from £4,000 to £5,000.

In particular, many small and medium businesses (SMEs) – who employ over 13 million people in the UK – will see a cut to their National Insurance bills. Next year this will be worth £4,200 on average for small businesses and £21,700 for medium sized firms who pay National Insurance. In total 905,000 micro, small and medium businesses will benefit from 2023-24.

National Insurance thresholds increased in July 2022 to lift 2.2 million of the poorest people in the UK out of paying the tax. The Chancellor has committed to retaining the level of these thresholds to support families. Taken together, the higher thresholds and the Levy reversal mean that almost 30 million people will be better off by an average of over £500 in 2023-24.

With immediate action pledged by the Prime Minister to maximise the cash benefit for people and businesses this year, the government is implementing the changes as soon as possible. Most employees will receive a cut to their National Insurance directly via payroll in their November pay, with some receiving it in December or January, depending on the complexity of their employer’s payroll software.

In addition, the Chancellor is expected to announce in his fiscal event tomorrow that the 1.25 percentage point increase to income tax on dividends announced alongside the Levy, and introduced in April 2022, will be reversed from April 2023.

Those who pay tax on dividends will save an average of £345 next year. The reversal of the ‘dividend tax’ rise signals renewed support for entrepreneurs and investors as part of the government’s drive to grow the economy and improve the standard of life for families across the UK.

Overall funding for health and social care services will be maintained at the same level as if the Levy were in place, and the government will be doing this without a tax increase. The additional funding used to replace the expected revenue from the Levy will come from general taxation.

The Chancellor is committed to reducing debt-to-GDP ratio over the medium-term and boosting growth, which will help sustainably fund public services.

Business leaders have welcomed the announcement.

Martin McTague, National Chair, the Federation of Small Businesses said: “This is clear and decisive action to support growth.

“The decision to reverse all four of these tax rises will support livelihoods, jobs and small businesses across the UK. Removing taxes on jobs, investment and growth is the right thing to do, and FSB has campaigned long and hard for this decision.

“The Chancellor is making clear he will let small businesses do what they do best: create jobs and support their local communities.

Shevaun Haviland, Director General, the British Chambers of Commerce said: “After months of campaigning, today’s Government announcement to reverse the increase to the National Insurance Contribution (NIC) is a big win for the British Chambers of Commerce and the business community.

“This is much needed support for businesses during these difficult times.

“There are a range of other challenges that must be addressed including labour shortages, supply chain disruption, and rising raw material costs.

“Tomorrow’s mini budget from the Chancellor is now a critical moment. To truly revitalise our economy for the difficult months ahead then tomorrow must bring a clear long-term plan that gives business the confidence to grow.”

Michelle Ovens CBE, founder, Small Business Britain said: “Small businesses need all the help they can get right now, so this move to reverse the national insurance rise will no doubt be received positively by business owners across the country, providing a boost that will go some way to help the many small firms out there struggling with cash flow.

“It is also good to see the immediacy of the action taken.”

Kitty Ussher, Chief Economist, the Institute of Directors, said: ““Businesses right across the country will be applauding the Government’s realisation that raising employers’ national insurance was a mistake.

“As the Institute of Directors has consistently and repeatedly argued from the outset, this was quite simply a tax on jobs, which businesses had to pay regardless of whether they are profitable. And the public agreed – the petition we launched at the beginning of the year attracted over 189,000 signatures.

“Many of our members told us that the impact of the increase was that they would have no choice but to push up prices, making inflation even worse. Others said the rise in the cost of employing people meant they would think twice about taking new staff on, or potentially make the difficult decision to let colleagues go.

“An independent report we commissioned from NIESR confirmed that the tax would reduce the UK’s international competitiveness and hit hardest those parts of the economy that suffered most from the pandemic. And even the Treasury itself said it would have ‘significant macroeconomic impact’.

Verity Davidge, Director of Policy, Make UK, said: “The Chancellor has clearly recognised the difficult situation companies are facing in response to eye watering increases in costs across the board.

“This is a welcome common sense reversal of a proposal which was both illogical and ill-timed when it was announced and, is even more so now given it is a tax on jobs. With the cost of employment in particular skyrocketing this will put cash back in the pockets of businesses and consumers at a time when they are burning through their cashflow at a rate of knots.

“Therefore, at a time when business is already facing unprecedented energy and other supply-side costs, this is a hugely important change that can improve the situation for SMEs trying to grow in very difficult circumstances.”

Andrew Goodacre, Chief Executive, British Independent Retailers Association said: “We have been concerned for some time about the rising costs of running a business. We therefore welcome this reversal of the NI increases as it will reduce the burden on employers as well as employees.

“Together with the recent energy support package, we hope the consumer confidence and business confidence return in readiness for the most important trading time of the year”.

REVERSAL OF THE HEALTH AND SOCIAL CARE LEVY: FACTSHEET

The government is committed to a low-tax, high-growth economy. To make sure people keep more of the money they earn and for businesses to have the right conditions to drive investment, growth and productivity.
The government is therefore cancelling the Health and Social Care Levy – initially introduced via a 1.25 percentage point rise in National Insurance contributions (NICs) – which took effect in April 2022.
This will be delivered in two parts:
- The government will reduce National Insurance rates from 6 November 2022, in effect removing the temporary 1.25 percentage point increase for the remainder of the 2022-23 tax year;
- The 1.25% Health and Social Care Levy will not come into force as a separate tax from 6 April 2023 as previously planned.
This tax cut reduces 920,000 businesses’ tax liabilities by £9,600 on average in 2023-24. This is 60% of the UK’s businesses with employer NICs liabilities.
It means 28 million people across the UK will keep an extra £330 a year, on average, in 2023-24.
We are making this change as quickly as possible, with it coming into force on 6 November.

How does cancelling the Health and Social Care Levy help spur growth?

This government’s central mission is to raise living standards for all in the UK through growing the economy through the private sector.
As a result of this tax cut, businesses will have more money to invest in becoming more productive, pay higher wages, create more jobs and support the overall growth of the UK economy.
Approximately 60% (920,000) of businesses with NICs liabilities will see a reduction their National Insurance bills, with 20,000 of these businesses taken out of paying NICs entirely due to the Employment Allowance, a relief which allows eligible businesses to reduce their employer National Insurance bills each year.
- At Spring Statement, on 23 March 2022, the previous government announced this would be rising by £1,000 from £4,000 to £5,000, which means 40% of businesses with NIC liabilities do not pay NICs.
The average saving for businesses is £9,600 in 2023-24.
For small and medium businesses who see their NICs bills reduced, the average saving is £4,200 and £21,700 respectively in 2023-24.
The sectors benefitting most from the reversal are professional, scientific and technical; wholesale and retail trade, repair of motor vehicles and motorcycles; and construction.

When will people receive the extra cash?

Most employees will receive the cut in their November 2022 pay directly via their payroll.
Basic rate taxpayers will on average see a gain of approximately £75 in 2022-23 rising to £175 in 23-24. For higher rate taxpayers, these figures are on average approximately £300 in 2022-23 rising to £700 in 23-24. For additional rate taxpayers, the gain will be on average approximately £1,650 in 2022-23 rising to £3,890 in 23-24.
Due to the complexities of some payroll software systems, there will be some people who receive the cut backdated in December 2022 or January 2023.
Although individuals should contact their employer for refunds as a first port of call in all circumstances, there may be circumstances where individuals may need to apply to HMRC for a refund (for example, if their employer is no longer trading, or if an individual has moved roles and their previous employer has confirmed they are unable to issue a refund retrospectively themselves).

Will there be less funding for health and social care as a result?

The Levy and increased dividend tax was expected to raise approximately £13 billion a year to fund health and social care. Funding for health and social care services will be maintained at the same level as if the Levy was in place.

What does this mean for the self-employed ?

Self-employed people and company directors will pay a blended rate of National Insurance – taking into account the changes in rates throughout the year – when they submit their annual self-assessment return.

What is happening to income tax on dividends?

From April 2023 the government is reversing the 1.25 percentage point increase to the rate of income tax on dividends which took effect in April 2022.
This move is designed to support entrepreneurs and investors as we seek to raise living standards through economic growth.

Extra information

For more information on National Insurance click here.

Chancellor Kwasi Kwarteng ‘to get Britain working again’

The Chancellor is expected to announce reforms to the welfare system that will encourage thousands more into work and to boost their earnings, helping grow the economy.
Around 120,000 more benefit claimants will be asked to take active steps to seek more and better paid work, or face having their benefits reduced.
Over 50s to get more support to find work, boosting economic growth.

The Chancellor is this week expected to announce changes to Britain’s welfare system that will help boost people’s earnings, get them into work and support economic growth.

Changes to Universal Credit expected to be announced later this week will require benefit claimants working up to 15 hours a week at National Living Wage to meet regularly with their Work Coach and take active steps to increase their earnings or face having their benefits reduced.

This gradual expansion is an increase from the 12-hour threshold and will bring an additional 120,000 benefit claimants into the Intensive Work Search Regime.

With more than 1.2 million job vacancies across the UK, Work Coaches will set clear expectations with claimants and make sure they stick to their commitments. These commitments could include applying for jobs, attending interviews or increasing their hours. People who don’t fulfil their job-search commitments without good reason could have their benefits reduced in line with existing benefit sanctions policy.

Eligible claimants over 50 years old, including new claimants and the long-term unemployed, will also get extra support from Work Coaches. The newly unemployed will get 9 months of targeted sessions, and people who are long-term unemployed will receive a booster session followed by 3 months of intensive employment support.

Chancellor Kwasi Kwarteng said: “Our jobs market is remarkably resilient, but it is not perfect. While unemployment is at is at its lowest rate for nearly fifty years, the high number of vacancies that still exist and inactivity in the labour market is limiting economic growth.

“We must get Britain working again. These gradual changes focus on getting people back into work and maximising the hours people take on to help grow the economy and raise living standards for all.

“It’s a win-win. It boosts incomes for families and helps businesses get the domestic workers they need, all while supporting economic growth.”

Secretary of State for Work and Pensions Chloe Smith MP said: “As we continue to face economic challenges and labour market shortages, we are committed to helping people on lower incomes to boost their pay – because we know work is one of the best ways to support your family and help grow our economy.

“Whether it’s increasing their hours in their current role, entering a new sector or switching careers, we want people of all ages and all stages to be able to progress into fulfilling careers.

“The expertise our dedicated DWP Work Coaches bring, will help to drive this change by removing barriers to progression and opening up opportunities for training and building skills, to increase earnings.”

These changes will be Great Britain-wide and, in line with usual practice, the UK Government will work with the Northern Ireland Civil Service to determine the most suitable way to deliver support in Northern Ireland in due course.

Certain groups will remain exempt from sanctions, including people who are unable to work due to long-term sickness or a disability.