On 23 September 2022, Kwasi Kwarteng, the new Chancellor (the fifth in as many years) delivered a Tax Cutting “Fiscal Event” or Mini-Budget to help boost economic growth. This was in line with promises made by the new Prime Minister Liz Truss when she was campaigning to be elected as new leader of the Conservative Party.
However, many commentators are concerned that the cost of the growth measures will add significantly to Government borrowing, which will have to be paid for by tax increases in the future.
The headline announcements were:
- The abolition of the 1.25% Health and Social Care Levy.=
- A reversal of the planned increase in corporation tax.
- A reduction in the basic rate of income tax.
- The abolition of the additional rates of incomes tax.
The Government’s bold strategy seeks to stimulate economic recovery and save jobs. Many European countries have introduced windfall taxes on energy companies to help fund support for energy costs. Liz Truss has however categorically rejected such a measure in the UK.
WHY WAS THAT NOT A REAL BUDGET?
The normal budget process is for the Office of Budget Responsibility (OBR) to report on the state of the UK economy at the time of the Budget and also assess the impact of the Budget proposals. As there was insufficient time for a full OBR report, the Chancellor’s statement was referred to as a “fiscal event”.
We still anticipate a ‘real’ Budget later on this Autumn.