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Everything you need to know about Kwasi Kwarteng’s mini-budget 2022

Here's how the government are looking to combat the cost of living crisis.

Danny Jones - 23rd September 2022

The Chancellor of the Exchequer, Kwasi Kwarteng, has delivered his 2022 mini-budget in an attempt to address concerns surrounding the ongoing cost of living crisis.

While significant tax cuts were already predicted ahead of the crucial economic update, many people across the country may have been surprised by the sheer extent of measures announced by the chancellor across the board.

Energy

Addressing the subjects on everyone’s mind early on, Kwarteng stated that the annual price of energy for UK households will now be limited to £2,500, resulting in savings of around £1,000 against the projected figures following the most recent energy cap.

He also confirmed that the £400 energy discount is still in place, with the most vulnerable homes receiving even more in government support. Some are less than convinced that any real ‘savings’ will be made.

Kwarteng says a typical energy bill of 2,500 this year is a SAVING of £1,000.

That's some BS spin right there. #MiniBudget
— Siobhan Benita 🇺🇦🌻 (@SiobhanBenita) September 23, 2022

Earlier this week, the government announced that they would be halving energy bills for businesses over the next six months. Today he confirmed that a relief scheme will be put in place, as well as an “energy market finance scheme” which will offer liquidity to traders.

Similar relief will be afforded to schools and charities.

Lending and inflation

The hope is that this overall energy plan will reduce inflation, which currently sits at 9.9% based on August’s figures, to 5% and see the trending rate of annual financial growth to 2.5%.

Not only does the government believes this will lower the wider cost of living pressures but also free up finances to help better fund public services.

The overall energy relief package is said to be costing approximately £60 billion, meaning a significant amount will have to be borrowed from the Bank of England.

Bankers’ bonuses cap and corporation tax hike scrapped

On the subject of banks, one of the most controversial parts of the Kwasi Kwarteng’s update was the announcement that the cap on bankers’ bonuses will be scrapped entirely, arguing that previous measures only led to higher wages and people paying tax in other countries outside of the UK.

Next year’s scheduled corporation tax increase from 19% to 25% is also going to be scrapped, the rationale being that “low tax encourages investment” both domestically and from overseas.

Once again, people are less than impressed that the nation’s highest-earners appear to be the ones benefiting the most from government policy.

This is a Bankers’ Budget:

– Scrapping the cap on bonuses
– Slashing tax for the top 1% of earners
– Cutting tax on big businesses' profits

When millions urgently need help with the cost-of-living crisis, the Tories are helping out their super-rich mates.#EnoughIsEnough
— Zarah Sultana MP (@zarahsultana) September 23, 2022

Removing red tape

The chancellor also said that the government are committed to removing further enterprise barriers caused by EU regulation, hoping to streamline “planning restrictions” across childcare, immigration, agricultural productivity, and digital infrastructure.

He sighted energy, telecoms and travel as key problem areas hamstrung by red tape.

However, he conversely criticised the ongoing strike action across the country and said that they plan to imitate other countries by introducing legislation to ensure minimum level service resumes.

Tax cuts

Elsewhere, businesses in nearly 40 different ‘designated zones’ have been promised tax cuts for the next 10 years and no stamp duty on new premises. Speaking of which, as of today, no payment will be required on the first £250,000 of a property’s value, with first-time buyers paying zero on the first £425,000.

In fact, it looks as though the overall tax system is set to be reviewed once again. Not only are previous corporation tax and stamp duty plans being scrapped but income tax, alcohol duty and more are all being reexamined as part of the not-so mini-budget.

Alcohol duty is set to be frozen in February, meaning that Brits can expect to save around 7p per pint, 38p per bottle of wine and £1.35 on spirits. VAT-free shopping is also due to be introduced for overseas visitors, with aim of increasing revenue from tourism.

Kwarteng also confirmed that the basic rate of income tax will be cut by 1p to 19p from April 2023, with the 45p tax rate for those earning over £150,000 will be abolished from the same time next year.

This is said to be the biggest series of tax cuts in 50 years.

£45 billion of tax cuts. This is biggest tax cutting event since 1972. Barber's "dash for growth" then ended in disaster. That Budget is now known as the worst of modern times. Genuinely, I hope this one works very much better.
— Paul Johnson (@PJTheEconomist) September 23, 2022

A wary winter

Despite the ‘real’ living wage being increased by 10% in an attempt to try and curb rising costs in almost every other walk of life, it goes without saying that the UK faces an extremely difficult period ahead as energy costs continue to rise, post-Brexit prices keep rising and we approach the ever expensive winter months.

The shadow chancellor Rachel Reeves told the Financial Times that regardless of the measures announced today, both the mini-budget and Liz Truss’ appointment as Prime Minister represents “another zigzag on a path of policy failure” rather than any real sign of change.

Featured Image – Flickr @ Policy Exchange