Kwasi Kwarteng says his statement will provide the “biggest package in generations” of tax cuts to send a clear signal that economic growth is the government’s priority.
It comes on top of plans to freeze household energy bills at £2,500 for a typical household. The chancellor says the government was never going to let households face soaring energy bills caused by Vladimir Putin’s war in Ukraine, telling people “help is coming” with the rising cost of living.
Aubrey Allegretti, political correspondent: Kwarteng starts by pinning the blame for inflation and spiralling energy bills directly on Putin.
After the criticism the Conservatives faced over the summer for months of inaction while the leadership contest dragged on, the chancellor tries to counter that narrative by claiming the new prime minister, Liz Truss, acted with “great speed”.
“People need to know help is coming, and help is indeed coming” is intended as a rallying cry of reassurance – however he tempers that expectation by reminding people energy markets are “volatile”.
Income tax cuts
Kwarteng announces the 45% additional rate income tax band for those earning more than £150,000 will be scrapped entirely.
The 40% higher rate, charged on incomes above £50,271, will remain.
The chancellor will bring forward a cut in the basic rate of income tax from 20% to 19% to April 2023.
The main income tax changes predominantly apply in England, Wales and Northern Ireland.
The chancellor says “we won’t apologise” for focusing on economic growth.
“For too long in this country, we have indulged in a fight over redistribution. Now, we need to focus on growth, not just how we tax and spend,” he says.
Kwarteng confirms the 1.25 percentage point national insurance rise introduced earlier this year will be cancelled from 6 November.
Aubrey Allegretti: The Treasury has for 48 hours been furious that news of its planned stamp duty cut leaked and sent the housebuying market into paralysis.
It was envisaged as being a possible “rabbit out of the hat” – a surprise, major announcement that would go straight to the top of the news agenda.
However, that would have been easily overtaken by the move Kwarteng managed to keep under wraps before announcing it with easily the biggest fanfare of the statement from his own side – scrapping the 45% additional rate band of income tax.
This will fuel criticisms that his mini-budget substantially benefits the better off, and deepen the divide among Tory MPs.
Kwarteng confirms the bankers’ bonus cap will be scrapped, to “reaffirm” the UK’s status as a leading financial centre.
He says the bonus was failing, and all it did was push up basic salaries of bankers or drive them outside the UK to Europe.
Aubrey Allegretti: Kwarteng is again walking a thin line between the various factions of the Conservative parliamentary party. He knows lifting the cap on bankers’ bonuses will go down like a cup of cold sick with some colleagues – particularly those from “red wall” seats.
But given the news of this move was leaked, it is unlikely to draw as much outrage as if it had been announced today for the first time.
Business tax cuts
Kwarteng says next year’s increase in corporation tax from 19% to 25% will be cancelled. It will remain at 19%. “We will have the lowest rate of corporation tax in the G20.”
Reversing the tax rise will put £19bn a year back into the economy.
Kwarteng says companies will be able to use this to “reinvest, create jobs, raise wages, or pay dividends which support our pensions”.
Every additional tax on business is ultimately passed on to families through higher prices, lower pay or lower return on savings, the chancellor says.
Aubrey Allegretti: This was one of two major measures that was expected (along with the national insurance rise being curtailed) – given Truss pledged them early on in the leadership contest.
It will be welcomed by business groups, but those firms that are not turning a profit or have been forced to close will certainly pour scorn on how much this helps them.
Stamp duty and other tax changes
Stamp duty will be cut for property buyers in England and Northern Ireland, as rumoured in media leaks this week. The chancellor says it is a “permanent cut” effective from today.
In the current system, there is no stamp duty to pay on the first £125,000 of a property’s value. It will be doubled to £250,000.
The threshold for first-time buyers will rise from £300,000 to £425,000.
The maximum property value for first-time buyers’ relief will rise from £500,000 to £625,000.
Elsewhere the chancellor says he will scrap the Office of Tax Simplification (OTS) and is asking every department to focus on this instead. Other measures to cut or reform tax rules include:
IR35 rules – which apply to contractors – will be simplified to remove “unnecessary complexity and cost” for businesses.
Planned increases in duty rates for beer, wine and cider will be cancelled.
Aubrey Allegretti: It is well known (and much rued by many Tory MPs) that the UK has an incredibly complex tax system – so his frank assessment that “it needs to be simpler” will go down well.
Scrapping the OTS and bringing it into “the heart of government” will also be welcomed by his colleagues, but the detail about how this will happen to ensure the work is not just forgotten and subsumed by other priorities will be key.
Expect the traditional criticism of “champagne corks popping in the city” from Labour as Kwarteng confirms that the planned beer, spirits and wine duty rise will not go ahead – coming after the bankers’ bonuses announcement.
Such moves are making this “mini-budget” sound more and more like an actual budget.
Growth and the public finances
Kwarteng says the government will expand the supply side of the economy through tax cuts to target economic growth of 2.5% a year.
The chancellor says he will turn a “vicious cycle of stagnation into a virtuous circle of growth”, although cautions that “none of this is going to happen overnight”.
Kwarteng commits to the Office for Budget Responsibility publishing a full economic and fiscal forecast before the end of the year.
The government’s energy support scheme is expected to cost £60bn for the six months from October.
Aubrey Allegretti: Kwarteng seeks to turn the last 12 years of Conservative economic wisdom on its head and present the government as new and radical – rather than hanging on the coattails of the last one.
He lays out his central point that “growth is not as high as it should be”, arguing this only leads to less money to fund public services, relying on higher taxes, and so on.
“We need a new approach for a new era” should be seen as nothing less than a bid to reinvent the Conservatives and present them as a party of change – to avoid being blamed for the mistakes of the past. (Despite, of course, Truss having served in the previous three Conservative governments.)
Kwarteng says the government will bring forward measures to streamline regulations and remove EU-derived laws.
The chancellor says a list of key infrastructure projects will be “prioritised for acceleration” today.
Aubrey Allegretti: To avoid accusations the government has reneged on Theresa May’s long-held mantra there is “no magic money tree”, Kwarteng put a figure of about £60bn on the expected value of the energy support over the next six months.
He got a slightly muted reception from the Tory benches to planning reforms – a thorny issue for the Conservatives. But appealing to their traditional deregulation instincts, Kwarteng got a better reception from backbenchers when he said: “We are getting out of the way to get Britain building.”
The chancellor says the government will legislate to tackle “militant trade unions” from closing down key infrastructure through strikes.
The laws will require unions to put pay offers to a member vote, to ensure strikes can only be called once pay talks have genuinely broken down, he says.
Aubrey Allegretti: Looming across the country this winter are a set of strikes that seek to draw attention to the paltry pay offers for public service workers – including across rail services during the first and last day of Conservative party conference next month.
Any threats to curtail the powers of trade unions will get the Tory benches behind him feeling perkier.
The chancellor confirms almost 40 investment zones will be created with tax breaks for businesses.
Areas including the Tees Valley, West Midlands, Norfolk and the west of England are in the running.
“If we really want to level up, we have to unleash the power of the private sector.”
Aubrey Allegretti: It used to be a phrase that defined the government’s mission – but levelling up only gets a passing mention from Kwarteng. He pays tribute to it and seeks to use it to defend the swingeing tax cuts today.
The investment zones are presented as a way of boosting development and growth in those areas where planning and environmental regulations only incur increased costs and could put off investors.