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A Budget for Growth

Faced with rising energy prices, a falling economy, and the highest tax burden since the 1940s the new Chancellor of the Exchequer, Kwasi Kwarteng’s job was never going to be easy. His solution, as announced at his emergency budget on 23 September 2023, has been to launch a ‘new approach for a new era;’ taking measures to open up the economy and encourage growth which it is hoped will then boost tax receipts.

Some of those measures such as the already announced energy price cap were inevitable if the country is to ride out the soaring energy price storm. Capping the energy costs of a typical house at £2,500 and delivering £400 of energy reductions over the winter alongside further measures to help the most vulnerable, may provide some relief from soaring bills. However, in a good news/bad news scenario it has been estimated that it should reduce inflation by 5% but cost £60billion over the first six months.

 Measures to help industry with energy prices have also been announced alongside a government-backed loan guarantee to help energy firms manage liquidity problems due to fluctuations in the wholesale cost of energy.

 Other measures to help businesses include:

 The creation of 38 new Investments Zones offering liberalised planning regulations and time-limited tax cuts. These include 100% tax relief on qualifying investments in plant and machinery as well as a 0% employer national insurance rate for the first £50,000 of earnings for new employees in Investment Zone businesses.

• Speeding up infrastructure projects
  
• New legislation to require unions to put pay offers to their membership before considering strike action
  

 In many ways this could also be called a budget of reversals. Previously announced measures which are now to be cancelled include:

 The National Insurance levy to raise funds for health and social care is to be scrapped with effect from 6 November 2022.

• The planned increase in corporation tax due to take effect in April 2023 has been scrapped, leaving corporation tax at 19%.
  
• The cap on bankers’ bonuses is to be scrapped.
  
• The top tax rate of 45% is to be scrapped from April 2023 alongside a reduction in the basic rate of tax to 19% from the same date.
  
• Planned increases in the duty rates for alcohol are also to be scrapped alongside some transitional reliefs.
  
• The IR35 reforms announced in 2017 and 2021 are also to be repealed.
  
• And for visitors to the UK, VAT free shopping is on the way back; helping to boost visitor spending in the UK.
  

 Finally, in a bid to boost the housing market, stamp duty thresholds are to be raised with effect from 23 September 2022. For first-time buyers, the threshold will increase from £300,000 to £425,000 whilst the overall threshold will double from £125,000 to £250,000.