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We attach brief notes on the Chancellor's statement.
Many of the items will be clearer once time passes/the detailed policy documents are published .
Government Budget Statement
September 2022, as amended 3.10! However then we got a third one from Jeremy, so most of this is scrap now, mostly binned once Mr. Sunak got the keys to No.10.
Now it's just the Stamp Duty reduction and NIC cut survive. But the next Budget is on 17th November, so we'll see what is likely to be policy thereafter.
Apparently the new lot are desperate to get the Borrowing requirement back to what is was when Rishi was Chancellor. (Only awful, not appalling)
prepared by:-
ABELL , with a little help from our many friends.
Officially……
“THE GROWTH PLAN 2022 ”
– says Mr. K Kwarteng
Or …..
Us politicians have given up taxing us to pay the bills, so in a screeching u-turn the peasants are going to get various tax breaks handed out to convince us everything in our electrically heated garden is rosy, and not to worry that fixing it has all been put on tick to mortgage my grandchildren’s children’s future.
Q
When is a budget not a budget?
A
When it’s only got giveaways, and no balancing income, so it’s a “Growth Plan” of course.
We set out below comments on the latest Budget of 2022 presented by our Chancellor on 23rd September 2022.
The Chancellor is supposed to run the economy according to three rules - set down soooo long ago in 2020:-
1. Cutting debt as a share of GDP each year – oops
2. Hammering down the PSBR – oops
3. Run a Budget surplus (in our life-times) – changed to my granddaughters lifetime (perhaps).
The borrowing problem hanging over the whole statement is fixed by an economy growing in overall size – we normally achieve 1-2%pa anyway (despite politicians fiddling).
Apparently it’s not previously occurred to a government that growing the economy at a faster rate than this will help increase the tax take automatically. Sounds simples?
As seems ever-increasing, there was lots in the Budget that had been already announced, and so was re-announced, also lots in the Budget that’s not happening until the next tax year+.
But the Press have all written about it as though it was all happening NOW.
Despite the covid crisis paralysing so much in peoples lives over 18 months, he was very sunny and upbeat as though we had just breezed through a small economic setback, and his brilliant ideas will help us now storm forward into a solar-energy fuelled future.
Does the new idea of reducing taxes and just sticking it all on borrowing make sense? – only the future will tell us.
Good news
ü Capital Allowances 100% FYA up to £1m per year continues for foreseeable future
the Corporation Tax increase next April 23 is cancelled
ü the Corporation Tax ‘bonus’ for banks will continue, so they will pay 8% more than normal companies in 23/24+.
ü IR35 (thanks to our close government access) has been significantly relaxed in order to help businesses take on staff flexibly according to their needs, and the choices of their staff too. See our separate Notes.
ü Booze taxation to have pending increases cancelled.
ü Pubs selling from barrels of beer get a discount on Duty
ü Fuel duties unchanged
ü The NIC rates increase of 1.25% definitely will be cancelled wef 6.11.22, so we’ll all feel £great just in time for Christmas.
ü Bankers bonus restriction, inherited from EU, is abolished. Whilst somewhat controversial if you’re one of the 99.98% of the country unaffected by this annual largesse, it rankles a bit that it’s gone. On the other hand it’s a bit odd to victimize one (deserving?) group of people over others equally deserving – estate agents, lawyers, oil company execs, water utilities etc…….
ü Research & Development generous tax reliefs continue.
ü Planning controls to be relaxed, to make it easier for builders to cover fields with houses – check out Great Dunmow as a vision of the future.
ü New Investment Zones to be created with even fewer regulatory restrictions than the rest of the country. E.g. Rates and NIC exemptions.
ü Venture Capital investment incentives will be increased for 23/24.
ü Stamp duty threshold immediately raised from 125k to 250k. And 1st time buyers it’s up from £300k to £425k.
ü VAT free shopping for high rollers visiting uk from overseas to be restored, and simplified. Apparently an eye-wateringly low exchange rate is not enough to tempt shoppers here, we need to give them tax reliefs too.
ü If you’re a ‘loafer’, apparently they’re going to ask you more searching questions before handing out £loads in Benefits to ‘persuade’ you to get off your sofa and work.
BAD NEWS
× Higher rate of IT of 45% abolished April 23+. This is to make us competitive in world tax levels, and tempt high flyers, AND their families back to UK. Good news for a few shops/schools in Knightsbridge perhaps. Bad news for those watching the PSBR go through the roof.
v STOP PRESS. On 3.10.2022 amidst smoking tyres, the abolition of the 45% higher tax rate is abolished. This means all the tax evaders postponing income to the 23/24 tax year have wasted their fees to PWC etc.
× Inheritance tax starting band still stays at £325,000 for foreseeable future
× Growth target “set at 2.5%” so that’s alright then. No idea why this miracle will happen seeing as it hasn’t happened recently.
× No ‘Amazon’ tax being introduced yet to level up online vs. terrestrial base costs. This is a terrible omission – it really is not hard to fix this running sore, and get another £1bn+ a year in of tax for free without harming anyone that we care a fig about.
× PSBR will be £bn no idea in 22/23, and £bn no idea even bigger in 23/24+, but total government borrowing will be 99.99% of GDP fairly soon, unless the miracle being prayed for by the government happens.
× Sterling £ will depreciate rapidly as the world will take a dim view of such extended tax cuts implemented unfunded. Unless of course Italy goes one better soon….
× No targets set for DVLA/Passport Office to attend to their post, or answer the phone the same day you call them etc. Whereas Doctors now do have targets to see patients.
HM Treasury Document Executive Summary
§ The Growth Plan 2022 makes growth the government’s central economic mission, setting a target of reaching a 2.5% trend rate. Sustainable growth will lead to higher wages, greater opportunities and provide sustainable funding for public services.
§ The United Kingdom currently faces a period of high inflation. The government has already taken significant steps to address high energy bills, the biggest challenge, by announcing the Energy Price Guarantee. This will mean the average household will pay no more than £2,500 per year for a period of two years from October 2022. The government has committed to a new six month Energy Bill Relief Scheme for businesses and other non-domestic energy users, including charities and public sector organisations, providing them with a discount on energy prices.
§ Taken together, these policies will significantly reduce inflation and support growth in the short term.
§ The government will also make significant interventions in the energy market to help reduce costs and improve resilience, over the longer term. Agreements will be negotiated with major gas producers and electricity generators to bring down wholesale prices. The new Energy Markets Financing Scheme, delivered with the Bank of England, will help to reduce disruption to the UK’s wholesale gas and electricity market. The North Sea Transition Authority will launch a new oil and gas licensing round.
§ To drive higher growth, the government will help expand the supply side of the economy. The Growth Plan sets out action to unlock private investment across the whole of the UK, cut red tape to make it quicker to deliver the UK’s critical infrastructure, make work pay, and support people to get onto the property ladder. New Investment Zones will provide time-limited tax reliefs, and planning liberalisation to support employment, investment, and home ownership.
§ The Growth Plan makes good the government’s commitment to cut taxes for people and businesses. The government will cut National Insurance contributions from November and cancel the Health and Social Care Levy and next year’s planned rise in Corporation Tax, keeping it at a competitive rate of 19%.
§ The government is going further to deliver tax cuts. From 23 September the threshold from which Stamp Duty Land Tax (SDLT) must be paid will be doubled to £250,000 for all home purchases. The threshold at which first-time buyers begin to pay SDLT will increase from £300,000 to £425,000, and the maximum value of a property on which first-time buyers’ relief can be claimed will also increase from £500,000 to £625,000.
§ The Growth Plan also brings forward the planned cut to the basic rate of income tax to April 2023,
§ and abolishes the additional rate of income tax completely, simplifying the tax system and making the UK more competitive. These tax cuts will ensure individuals keep more of what they earn, and make the UK a more attractive place to live and work.
§ The government will also repeal the complex changes to off-payroll working, allowing businesses to get on with business. Tax simplification will be embedded at the heart of the tax system as a core HM Treasury and HMRC priority.
§ The government is committed to fiscal sustainability and reducing debt as a proportion of Gross Domestic Product (GDP) over the medium-term. The government will take the responsible decisions that are needed to achieve this aim, including keeping spending under control. The Chancellor has commissioned the Office for Budget Responsibility to produce a forecast before the end of the calendar year.
§ Taken together, reforming the supply side of the economy, cutting and simplifying tax, and maintaining fiscal discipline will drive efficiency, enhance UK competitiveness, and help to boost growth sustainably in the long term.
Budget document
Tax rates 22/23 remain unchanged, just NIC reduced.
Thanks UK Treasury© for the data
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