your Quarteng cut taxes with £45bn on Friday in a huge gamble to step up grow for the next general election.
The 6ft 5in Chancellorswung his ax against income tax, national insurance, corporate income tax and stamp duty in a historic mini-budget aimed at transforming Britain’s moderate growth.
The most eye-catching was abolishing the top 45p rate of income taxand subtract 1 pence from the base rate from April to reduce it to 19 pence in the lba year ahead of schedule, with 31 million people benefiting from the change.
Revealing the biggest tax cuts since 1972, he told the Commons, “We are at the dawn of a new era. For too long in this country we have surrendered to a struggle for redistribution. Now we need to focus on growth, not just how we pay and spend taxes. It is our duty to make the UK one of the most competitive economies in the world.”
But when the government started borrowing and issuing debt to fund the tax cuts and deal with the energy bill crisis, the pound collapsed amid a feverish mood in the markets. However, Mr. Kwarteng pushed through, laying out clear battle lines for the next election and:
* The increase in national insurance in April of 1.25 percentage points from November 6 reversed. He stressed that the tax cut would mean an extra £330 a year on average for 28 million people in the UK in 2023-24. It would also reduce the tax liabilities of 920,000 companies by an average of £9,600.
* His predecessor Rishi Sunak’s planned corporate tax hike from 19 percent to 25 percent next year. The Chancellor stressed: “That’s £19bn for companies to reinvest, create jobs, raise wages or pay the dividends that support our pensions.”
* Tax cut plans will cost £45bn in 2026-27, Treasury documents say.
* Lifted the cap on bankers’ bonuses and promised an “ambitious package of regulatory reforms” to boost the city.
The Treasury said that as a result of Friday’s measures and previous aid packages to cut energy bills, the government would seek to raise a further £72 billion in debt to cover the cost of the packages.
But before the Chancellor spoke, the pound had taken a beating on the foreign exchanges. Shortly before 11 a.m., the pound fell 1.61 cents to $1.104 and the FTSE-100 index fell 1.5 percent or 111 points.
Stamps fell off amid concerns about a massive surge in government borrowing. The yield on five-year government bonds rose by half a percentage point, the largest increase ever. Economists have warned that the tax cut could fuel inflation, which could force the Bank of England to raise interest rates, possibly up to five percent.
Such an increase would mean that many homeowners, including some who borrowed large sums when interest rates were low, would face skyrocketing mortgage payments.
The Bank, which said Britain may already be in recession, said yesterday that it was prepared to act decisively if necessary to bring inflation under control, which is expected to peak at around 11 percent later this year. reach, lower than previously forecast after the government support package to keep the bills low.
Tearing up the ‘orthodoxy’ of the treasury. Mr. Kwarteng’s radical blueprint for growth included more than 30 measures.
In a twisted speech at the end of his 24-minute speech, he told MPs: “Take the extra rate of income tax. At 45 percent, it is currently higher than the top rate in G7 countries like the US and Italy and even higher than in Social Democrats like Norway. But I’m not going to lower the extra tax rate today, I’m going to abolish it altogether.”
He lowered the base rate to 19 pence from April 2023, he added: “That means a tax cut for more than 31 million people in just a few months. That means we will have one of the most competitive and growth-enhancing income tax systems in the world.”
Hundreds of thousands of Britain’s richest people, earning more than £150,000, are expected to benefit from the abolition of the 45p rate, averaging £10,000.
But Shadow Chancellor Rachel Reeves said Prime Minister Liz Truss and the Chancellor were like “two desperate gamblers in a casino chasing a losing run.” Ministers exposed themselves to accusations that they favored the rich over the less fortunate.
But Mr. Kwarteng continued with his groundbreaking reforms, removing the cap on banker’s bonuses to avoid another financial crash.
He said: “We need global banks to create jobs here, invest here and pay taxes here in London, not in Paris, not in Frankfurt, not in New York.”
The chancellor took a stand against the unions, saying the government would legislate to require them to make wage offers to a member vote, to ensure that strikes can only be called if negotiations “have really broken down”.
To boost London’s high-end shops, VAT-free shopping is being introduced for overseas visitors.
The struggling hospitality industry sees planned increases in excise tax rates on beer, cider, wine and spirits lapse. Mr Kwarteng announced 38 investment zones, including at least one in London, in his aim to boost the UK’s trend growth rate to 2.5 percent.