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“Mini” Budget – Tax cuts and scepticism

kwateng

Businesses have welcomed the Chancellor’s announcement that the Corporation Tax and National Insurance rises are to be scrapped.

They were among a series of measures announced by the Chancellor, Kwasi Kwarteng in his mini budget.

The tax cuts ranged from income tax, to stamp duty and the scrapping of a cap on bankers’ bonuses. He also announced the creation of new investment zones, which will have tax benefits for companies investing in them. 

He stated:

“Every additional tax on business is ultimately passed through to families through higher prices, lower pay, or lower returns on savings.

“So I can therefore confirm that next year’s planned increase in Corporation Tax will be cancelled. The UK’s corporate tax rate will not rise to 25% – it will remain at 19%.

“We will have the lowest rate of Corporation Tax in the G20. This will plough almost £19bn a year back into the economy. That’s £19bn for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions.”

He added:

“Our duty is to make the UK one of the most competitive economies in the world – and we are delivering.”

Katie Gallagher, Managing Director of Manchester Digital and chair of the UK Tech Cluster Group, responded to the announcement:

“The tech and digital businesses that we represent welcome the reversal of the increase in corporation tax and the National Insurance increase; as well as the reduction in income tax. In particular, this will give start-ups and early-stage businesses a boost to ensure they are given every chance to succeed. 

“However, tech companies and start-ups are nervous for the economic future, having seen investment drying up, hiring freezes and the ongoing skills shortages. We do welcome the increase to limits on Seed Enterprise Investment Scheme (SEIS) funding, which now allows start-ups to raise up to £250,000 under the scheme, 66% more funding than previously. 

“We tentatively welcome the concept of the new low tax Investment Zones and would call upon the Government to work hand in hand with the existing regional tech eco-systems which already understand the local economy and where investment is needed to really flourish. 

“This Budget leaves many questions about costings but in the short term we are glad to see some measures to support businesses. We look forward to seeing the full economic and fiscal forecast later this year.”

Martin Lewis, the founder of MoneySavingExpert stated:

“That really was quite a staggering statement from a Conservative party government.

“Huge new borrowing at the same time as cutting taxes.

“It’s all aimed at growing the economy.  I really hope it works.  I really worry what happens if it doesn’t.”

After the budget announcement, the pound fell to a 37-year low against the dollar.

Wigan Labour MP, Lisa Nandy, the Shadow Secretary of State for Levelling Up, Housing and Communities wrote on Twitter:

“This Mini Budget is a massive transfer of money from working families to the richest.

“But two-thirds of the highest earners who’ve just had their taxes cut live in London and the South East.

“So it’s also a massive transfer of wealth from the North and Midlands to the capital.”

This afternoon, Jamie Driscoll, Elected Metro Mayor for the North of Tyne responded to the Investment Zone announcement:

“We’re always up for a new scheme that boosts regional growth and improves residents’ lives. But whether it will work depends on one thing: is the Government investing more or less into the North of Tyne than it was before?

“We know what we’re doing here. We’ve already created thousands of jobs. We’re already the number one region in the country for inward investment. We’re already taking real action to combat the climate emergency. 

“We want to work with Government to see our region flourish, but these ‘investment zones’ need to be part of a wider package – with more money, in transport, skills, and education, too. Only then will we have the wider investment and power our businesses and communities really need.”

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