The mini budget is the phrase on everyone’s lips; but what does it actually mean, and how will you be affected?
On Friday 23 September, the Chancellor of the Exchequer, Kwasi Kwarteng announced the new Growth Plan with the biggest package of tax cuts in generations. Simultaneously, the British pound sterling dropped to its lowest level ever.
The new Growth Plan is widely being referred to as the ‘mini budget’ in the media – what does it really mean? And how bad really is Britain’s economic forecast?
What are the terms of the mini budget?
The budget is normally announced in the Spring, hence the term ‘mini budget’ for the Chancellor of the Exchequer Kwasi Kwarteng’s latest Growth Plan.
It details a number of economic policies including:
- Corporation tax rise cancelled
- Basic rate of income tax cut to 19% in April 2023
- Cuts to Stamp Duty
- Ambitious targets set for 2.5% trend of growth
‘Economic growth isn’t some academic term with no connection to the real world’
The Chancellor of the Exchequer, Kwasi Kwarteng, commented: “Economic growth isn’t some academic term with no connection to the real world. It means more jobs, higher pay and more money to fund public services, like schools and the NHS.
“This will not happen overnight but the tax cuts and reforms I’ve announced today – the biggest package in generations – send a clear signal that growth is our priority.
“Cuts to stamp duty will get the housing market moving and support first-time buyers to put down roots. New Investment Zones will bring business investment and release land for new homes in communities across the country. And we’re accelerating new road, rail and energy projects by removing restrictions that have slowed down progress for too long.
“We want businesses to invest in the UK, we want the brightest and the best to work here and we want better living standards for everyone.”
What does our Prime Minister Liz Truss have to say?
Truss has defended the mini budget, claiming that the Conservative government had to act on the energy crisis.
We are facing difficult economic times globally.
We must put this country on a trajectory for long-term growth whilst maintaining fiscal discipline.
Cutting taxes will boost investment, creating jobs and opportunities for all.
That is what our Growth Plan will deliver.
— Liz Truss (@trussliz) September 29, 2022
Our Growth Plan delivers vital reforms to:
✅ Get Britain building
✅ Attract investment
✅ Grow the economyRead more: https://t.co/ZYG1XdToVO pic.twitter.com/EvGKSOh1AN
— UK Prime Minister (@10DowningStreet) September 28, 2022
What has been Labour’s response to the mini budget?
It will come as no surprise that Labour is extremely unhappy with the mini budget. The Leader of the Opposition, Sir Keir Starmer, has urged Liz Truss to recall Parliament and abandon the budget.
Starmer: ‘A self-inflicted crisis’
Starmer, like many others, believes that the Conservative Party has lost control of the economy: “Unlike other situations where it may be a world event, an unexpected event that causes this sort of crisis this is self-inflicted. This was made in Downing Street last Friday.
“And for what? For uncosted tax breaks for those earning hundreds of thousands of pounds.”
The Treasury has rejected calls to reverse any of last week’s budget. Parliament is currently suspended while the two main parties hold their annual conferences. It is due to come back on 11 October.
The government’s economic chaos is already clobbering those like Rabia who're trying to get a mortgage or to re-mortgage.
This crisis was made in Downing Street but it’s being paid for by working people.
The Tories must get back to Parliament and reverse their kamikaze budget. https://t.co/bw8B2TOUgl
— Keir Starmer (@Keir_Starmer) September 30, 2022
Across the country, people are worried about their energy bills, their mortgages, their pensions.
This is entirely self inflicted by the government.
Abandon this act of economic self-harm and recall parliament now. pic.twitter.com/qRtwiDfLfH
— Keir Starmer (@Keir_Starmer) September 28, 2022
https://twitter.com/AngelaRayner/status/1575211093911556096?s=20&t=aTrqNYpIMkOl98Su2rgiZw
Who will benefit from the tax cuts?
The mini budget blatantly, and unapologetically, favours the wealthiest people in the UK.
Kwarteng announced that 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 basic rate of income tax will be cut from 20% to 19% to April 2023. In other words, the basic rate of income tax payable on earnings over £12,571 will drop to 19p from 20p in the pound from April 2023. This means you’ll be £130 a year better off if you’re a basic rate taxpayer and £360 a year better off if you’re a higher rate taxpayer.
The Growth Plan will also cancel UK-wide rise in corporation tax which was due to increase from 19% to 25% in April 2023
Will my universal credit and benefits stay the same?
The short answer is no, not really.
Rules around Universal Credit will be made stricter by reducing benefits if claimants do not fulfil job search commitments.
Benefits will be reduced
In fact, roughly 120,000 more people on Universal Credit will be asked to do more to seek work; and if they do not fulfil this expectation, their benefits will be reduced.
Jobseekers over 50 will be given extra time with work coaches to help them return to job market
Are there cuts to Stamp Duty?
First-time buyers will be eligible for Stamp Duty cuts. As of last Friday, anyone completing a house purchase will pay no stamp duty on the first £250,000 of your property‘s price.
How will the mini budget affect my energy bills?
The government plans to freeze energy bills at £2,500 per household which Kwarteng claims will reduce inflation by 5% points.
This means the average household will have to pay £2,500 a year for energy over the next two years. There has been no immediate new support announced, besides the £400 energy grant.
What does the public have to say about the mini budget?
It’s easier to think the mini-budget was a mistake or simple incompetence.
It now seems increasingly likely that it was calculated and deliberate.
The pound shortened and now public services in the U.K. ripe for private takeover.
The Truss puppeteers can’t lose! Deliberate.
— Dr Dan Goyal (@danielgoyal) September 28, 2022
Listening to a professor being interviewed on BBC news, making sense of the mini budget. The interviewer was so disappointed when he was positive about a lot of it. The media are really fuelling things…again.
— Deborah Martin (@deborah71424447) September 29, 2022
Part of the savings from income that is spent evenly in needs throughout the month