Kwarteng unveils Mini Budget, promising to ‘release the enormous growth potential’ of the UK

Kwarteng delivered the announcements this morning (23 September). Image: ParliamentLiveTV

The mini-Budget has been long-awaited, with energy and commodity prices in the UK having skyrocketed over the past year and calls for more Government intervention mounting. The Government had put a pause on announcements during the Conservative Party leadership race, which concluded on 5 September with the election of Liz Truss. Truss, as expected, chose former Business and Energy Secretary Kwarteng to be her Chancellor.

As expected, his mini-Budget included several measures relating to taxes and benefits for UK citizens. These include:

• A National Insurance cut. This had already been announced before today. The rise of 1.25%, announced in April 2021, will be stopped.
• A cut to Stamp Duty Land Tax in England. Previously, buyers would pay no tax on the first £125,000 of their purchase, rising to £300,000 for first-time buyers. Now, the limit for first-time buyers is £425,000., and is set at £250,000 for others. This measure has no set end date.
• New, tighter rules on Universal Credit. Certain groups of people will see a reduction in benefits if they do not take action to increase their pay, such as working more hours or choosing a better-paid role, or both.
• Cancellation of the planned Health and Social Care Levy.
• Cutting the basic rate of Income Tax from 20p to 19p, and scrapping the 45p additional rate of Income Tax.

Some sweeping changes for the private sector were also announced, including:

• A real-terms reduction in Corporation Tax rates. Previous Chancellor Rishi Sunak had planned an increase to 25% from 2023. Now, it will remain at 18%.
• The removal of a cap on bonuses for bankers. Previously, the cap stood at 100% of a professional’s salary, with the ability for a doubling to 200% with shareholder approval. Shouts of dissent could be heard as this measure was announced,
• Pension Charge Cap reforms, which should remove the cap for schemes meeting certain requirements.
• A widening of the criteria for the Seed Enterprise Investment Scheme for early-stage companies.
• Changes to the Company Share Option Plan, meaning that businesses can offer staff shares worth up to £60,000, up from £30,000.
• Increasing the Annual Investment Allowance to £1m per business from April 2023.

Kwarteng also emphasised the new Energy Bills Relief scheme for business, announced by new Business and Environment Secretary Jacob Rees-Mogg earlier this week. The scheme caps the price businesses pay for each unit of electricity and gas in line with pricing for homes. It will last for at least six months and most businesses stand to see energy bills reduced by 40-50%. Public sector organisations, NGOs and businesses of all sizes are covered. While this has been welcomed, some groups have asked for more long-term certainty.

Kwarteng did not mention energy efficiency in his speech, but documents from the Treasury state that legislation will be brought forward to oblige energy suppliers to “take action to reduce the energy bills” of customers. Measures will start in April 2023 and run for three years, totalling £1bn, it is stipulated in the small print of today’s announcements.

The documents state: “Energy prices are the largest driver of hight inflation.”

Growth Plan

Kwarteng also presented a new ‘Growth Plan’ first confirmed by the Treasury late last night (22 September). The full documents have now been published on the Treasury’s website. The Plan’s headline measure is the creation of 38 new ‘Investment Zones’ across England, spearheaded by local councils (see the end of the article for a full list). Similarly to Freeports, Investment Zones will be able to offer local incentives designed to encourage businesses to set up there, or to expand if they are already there.

In Investment Zones, businesses will be able to pay lower rates of tax. Plants and machinery will have tax removed entirely. Buildings and infrastructure will see tax rates reduced for a ten-year period. Stamp duty will be scrapped for purchases of land for business or residential developments. No business rates will apply to newly-occupied premises.

The Government will also relax planning rules in these areas – including, the Treasury has confirmed, environmental requirements for developers.

Investment Zones will only be created if local leaders so wish. Kwarteng said the Government is in “early discussions” at this point in time.

Outside of these Investment Zones, the Plan paves the way for cuts to planning regulations for nationally significant infrastructure projects across England. The Treasury has stated that around 100 projects will be impacted, from roads, to railways, to offshore wind farms.

“In 2021 it took 65% longer to get consent for major infrastructure projects than in 2012,” The Treasury stated. It bemoaned the fact that development, consultation and consent for major roads have taken, on average, five to seven years since 2012, and that some offshore wind farm developers have seen the process taking 13 years.

Kwarteng called the planning system “fragmented” and said:  “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.” He confirmed that more changes will be made in the coming weeks, including the scrapping of EU laws “that constrain our growth”.

Truss smiled at this statement, but it has already attracted much concern from the UK’s green economy. It has been reported that the UK could scrap nutrient neutrality requirements, which stipulate that planning permission should be denied for developments that could result in increased phosphate and nitrate levels in water, to give one example.

The local authorities named as being in talks to host Investment Zones are:

• Blackpool Council
• Bedford Borough Council
• Central Bedfordshire Council
• Cheshire West and Chester Council
• Cornwall Council
• Cumbria County Council
• Derbyshire County Council
• Dorset Council
• East Riding of Yorkshire Council
• Essex County Council
• Greater London Authority
• Gloucestershire County Council
• Greater Manchester Combined Authority
• Hull City Council
• Kent County Council
• Lancashire County Council
• Leicestershire County Council
• Liverpool City Region
• North East Lincolnshire Council
• North Lincolnshire Council
• Norfolk County Council
• North of Tyne Combined Authority
• North Yorkshire County Council
• Nottinghamshire County Council
• Plymouth City Council
• Somerset County Council
• Southampton City Council
• Southend-on-Sea City Council
• Staffordshire County Council
• Stoke-on-Trent City Council
• Suffolk County Council
• Sunderland City Council
• South Yorkshire Combined Authority
• Tees Valley Combined Authority
• Warwickshire County Council
• West of England Combined Authority
• West Midlands Combined Authority
• West Yorkshire Combined Authority