Mini-budget 2022: chancellor accused of deepening inequality as stamp duty and top rate of income tax cut – live | Mini-budget 2022

Scottish and Welsh governments say mini-budget will deepen inequality

Severin Carrell

Severin Carrell

The chancellor’s sweeping tax cuts for wealthy will deepen inequality and do little to help those in greatest needs by “embedding unfairness”, the Scottish and Welsh governments said.

John Swinney, Scotland’s finance secretary, and Rebecca Evans, the finance minister for Wales, accused Kwasi Kwarteng of protecting the rich at the expense of the poorest families, now struggling with soaring inflation and fuel costs.

Both devolved governments – which have their own, independent policies on income tax and house sales taxes – signalled they are unlikely to follow the chancellor’s hand-outs for the rich in their own budgets next year. Evans said:

Today’s announcements show the UK government is heading in a deeply worrying direction.

Instead of delivering meaningful, targeted support to those who need help the most, the chancellor is prioritising funding for tax cuts for the rich, unlimited bonuses for bankers, and protecting the profits of big energy companies.

Swinney added:

The chancellor’s statement today will provide cold comfort to the millions of people across Scotland who have been looking for the UK government to provide support for those that need it most. Instead we get tax cuts for the rich and nothing for those who need it most.

Kwarteng’s decision to lift the starting rate for income tax to £14,732, lowering the basic rate to 19p, his abolition of the top 45p income tax rate and changes to stamp duty rates from next April, will not directly affect Scotland and Wales.

Neither the left of centre Scottish National party and Scottish Green government in Edinburgh, nor the Labour government in Cardiff, are likely to abolish their top tax rates. In Scotland, the top rate is 46p for those earning over £150,000.

But they will now face pressure to lift the starting rate to match Kwarteng’s new starting rate and higher basic rate threshold, which increase incomes for tens of millions of employees in England and Northern Ireland.

The chancellor’s reforms mean the Scottish government will receive around £600m and Wales around £70m in additional funding from the Treasury. The fiscal framework rules that set up their devolved tax regimes require the Treasury to compensate the devolved governments for any tax cuts in England, to help balance out the fiscal effects of those changes.

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What mini-budget income tax changes mean for Scotland and Wales

Severin Carrell

Severin Carrell

The Scottish and Welsh governments are under pressure from the Conservatives to match Kwasi Kwarteng’s tax cuts for the rich, with the Tories claiming they will stimulate growth and competitiveness.

None of the chancellor’s changes to income tax rates and bands, nor his changes to stamp duty, will apply directly to Wales and Scotland as both devolved governments set income tax and property sales taxes themselves.

But under the complex deal with the Treasury under which income tax powers were devolved, Scotland and Wales are entitled to compensation from the UK government for the effects of tax cuts in England and Northern Ireland.

The Scottish government will receive around £600m and Wales around £70m once the cuts take effect: that will put both governments under pressure from some quarters to use that money to match Kwarteng’s cuts. Scotland’s top income tax rate is presently 46p.

Liz Smith, the Scottish Tories’ finance and economy spokeswoman, said:

It is wrong that Scots already pay higher tax than their counterparts in the rest of the UK and, unless the SNP match these tax cuts, that gap is going to widen, which will further hamper Scotland’s already poor productivity and competitiveness

The Chartered Institute for Taxation said that if Scotland’s income tax rates are not changed in next year’s Holyrood budget, someone earning £27,850 a year would pay £152.80 more in Scotland; someone earning £200,000 would pay £6,045.80 more. That would lead to “significant divergence” in the tax regimes in force across the UK, it said.

Similar differences will emerge in Wales.

Philip White, director of the Institute for Public Policy Research Scotland, urged ministers in Edinburgh to use the extra money to improve the finances of the poorest, and not the rich. He said:

The Scottish government has a clear opportunity to strike a different course. At a time of crisis, and with ambitions to tackle child poverty and reduce emissions, it must use its upcoming budget wisely by rejecting regressive tax cuts and driving a more progressive approach.

The FT’s Jim Pickard suggests that yesterday’s fracking announcement from Jacob Rees-Mogg may have been a “bait and switch” operation to conceal the fact that the government sees onshore wind as a better solution to the energy crisis than shale gas. (See 1.23pm.) Many Tory hate onshore windfarms, while some of them are very pro-fracking.

wondering if the fracking announcement yesterday was political red meat to overshadow the fact that the Truss government is quietly accelerating the rollout of onshore wind farms pic.twitter.com/22BHk8TXnk

— Jim Pickard (@PickardJE) September 23, 2022

Torsten Bell, chief executive of the Resolution Foundation, has welcomed the move.

Kwarteng set to remove de facto ban on new onshore windfarms

Rowena Mason

Rowena Mason

Kwasi Kwarteng looks likely to lift a de facto ban on new onshore windfarms after the government said it would bring planning consent into line with that for other infrastructure.

It has been very difficult for onshore windfarms to get planning permission since David Cameron put in place a tough consent regime in 2015. Earlier this year Kwarteng pushed for the restrictions to be lifted but he encountered cabinet opposition.

The regime will now be loosened, with the chancellor’s growth plan stating:

The government will unlock the potential of onshore wind by bringing consenting in line with other infrastructure. The UK is a world leader in offshore wind, with 8GW of offshore wind currently under construction. By 2023 the government is set to increase renewables capacity by 15%, supporting the UK’s commitment to reach net zero emissions by 2050.

Although the government has trumpeted its decision to allow firms to explore fracking further, few experts think it is likely to produce much gas in the near future. Unblocking the potential for onshore wind projects could be a much quicker and more productive way of boosting electricity supplies and helping to bring down prices.

Some Conservative MPs oppose windfarms as a blight on the landscape but public attitudes are much more supportive of the technology.

Jess Ralston, a senior analyst at the Energy and Climate Intelligence Unit, said:

The ban on onshore wind – which around eight in 10 people support – has been a major anomaly in British energy policy given it’s both cheap and popular with the public. So a decision to lift the ban suggests the new government has listened to the experts and understands building more British renewables reduces our reliance on costly gas and so brings down bills.

Scottish and Welsh governments say mini-budget will deepen inequality

Severin Carrell

Severin Carrell

The chancellor’s sweeping tax cuts for wealthy will deepen inequality and do little to help those in greatest needs by “embedding unfairness”, the Scottish and Welsh governments said.

John Swinney, Scotland’s finance secretary, and Rebecca Evans, the finance minister for Wales, accused Kwasi Kwarteng of protecting the rich at the expense of the poorest families, now struggling with soaring inflation and fuel costs.

Both devolved governments – which have their own, independent policies on income tax and house sales taxes – signalled they are unlikely to follow the chancellor’s hand-outs for the rich in their own budgets next year. Evans said:

Today’s announcements show the UK government is heading in a deeply worrying direction.

Instead of delivering meaningful, targeted support to those who need help the most, the chancellor is prioritising funding for tax cuts for the rich, unlimited bonuses for bankers, and protecting the profits of big energy companies.

Swinney added:

The chancellor’s statement today will provide cold comfort to the millions of people across Scotland who have been looking for the UK government to provide support for those that need it most. Instead we get tax cuts for the rich and nothing for those who need it most.

Kwarteng’s decision to lift the starting rate for income tax to £14,732, lowering the basic rate to 19p, his abolition of the top 45p income tax rate and changes to stamp duty rates from next April, will not directly affect Scotland and Wales.

Neither the left of centre Scottish National party and Scottish Green government in Edinburgh, nor the Labour government in Cardiff, are likely to abolish their top tax rates. In Scotland, the top rate is 46p for those earning over £150,000.

But they will now face pressure to lift the starting rate to match Kwarteng’s new starting rate and higher basic rate threshold, which increase incomes for tens of millions of employees in England and Northern Ireland.

The chancellor’s reforms mean the Scottish government will receive around £600m and Wales around £70m in additional funding from the Treasury. The fiscal framework rules that set up their devolved tax regimes require the Treasury to compensate the devolved governments for any tax cuts in England, to help balance out the fiscal effects of those changes.

Almost half gains from tax cuts in mini-budget go to richest 5%, who gain £8,560 on average, Resolution Foundation says

One of the most striking figures in the Resolution Foundation analysis of the mini-budget (see 12.37pm) is the revelation that almost half of the gains from the tax changes will go to the richest 5% of people, who will gain £8,560 on average. It says:

The tax cuts confirmed today largely reverse those introduced by Rishi Sunak in recent years, but with a particular focus on higher income households driven by the reversal of the rise in national insurance and scrapping of the 45p rate of income tax. Someone earning £200,000 will gain £5,220 a year, rising to £55,220 for someone earning £1 million. Someone earning £20,000 will gain just £157.

Almost two-thirds (65 per cent) of the gains from personal tax cuts announced today go to the richest fifth of households, who will be better-off on average by £3,090 next year. Almost half (45 per cent) will go to the richest 5 per cent alone, who will be £8,560 better off. In contrast, just 12 per cent of the gains will go to the poorest half of households, who will be £230 better off on average next year.

4 – Almost two-thirds (65%) of the gains from personal tax cuts announced will go to the richest fifth of households: Almost half (45%) will go to the richest 5% alone, while just 12% of the gains will go to the poorest half of households. pic.twitter.com/QxsWFEgLba

— Resolution Foundation (@resfoundation) September 23, 2022

Union leaders condemn plan to place new restrictions on strike action

And union leaders have also criticised the proposals to place new restrictions on strike action.

In his speech Kwasi Kwarteng said:

At such a critical time for our economy, it is simply unacceptable that strike action is disrupting so many lives.

Other European countries have minimum service levels to stop militant trade unions closing down transport networks during strikes.

So we will do the same.

And we will go further.

We will legislate to require unions to put pay offers to a member vote, to ensure strikes can only be called once negotiations have genuinely broken down.

In response Mick Lynch, general secretary of the Rail, Maritime and Transport (RMT) union, said:

We already have the most severe anti-democratic trade union laws in western Europe and this latest threat will rightly enrage our members.

The government should be working towards a negotiated settlement in the national rail dispute, not seeking to make it even harder to take effective strike action.

RMT and other unions will not sit idly by or meekly accept any further obstacles on their members exercising the basic human right to withdraw their labour.

And Manuel Cortes, general secretary of the TSSA, said:

Unions are democratic organisations and industrial action only occurs as a last resort and after a postal ballot of members which also includes having to meet undemocratic thresholds.

Frankly, having to ballot our members on pay offers before they can take industrial action will not make a blind bit of difference.

If the offer is rubbish, it will still be rubbish whether our elected workplace reps have consulted our members on it or a ballot has taken place.

This new Tory proposal will serve only to elongate disputes and generate greater anger among union members. It will do precisely nothing to encourage employers to come to the negotiating table with realistic offers.

Union leaders have condemned the mini-budget as “a budget for the rich”.

The Unite general secretary, Sharon Graham, said it was a budget for the rich, big business and the City.

This mini-budget is unashamedly a budget for the rich, big business and the City – highest earners’ tax slashed, corporation tax slashed, investment bankers’ bonuses let rip. #MiniBudget 1/3

— Sharon Graham (@UniteSharon) September 23, 2022

Billionaires and city bankers will once again be considering which tax haven they will stash their money in, whilst millions of ordinary families continue to struggle to make ends meet. #MiniBudget 2/3

— Sharon Graham (@UniteSharon) September 23, 2022

If there are billions of pounds available to spend then the best way to help the economy would be to give public sector workers a pay rise. #MiniBudget 3/3

— Sharon Graham (@UniteSharon) September 23, 2022

The Unison general secretary, Christina McAnea, said it was “an all-out offensive to make the wealthiest even richer”. She added:

In the middle of a huge cost-of-living crisis, this isn’t the time for economic experiments that are doomed to fail.

There are masses of essential jobs that need filling. The best way to deal with 300,000 vacancies across health and care is to give staff a wage rise that tops inflation.

Threats to unions are attacks on employees simply trying to win better pay. Choosing to side with city bankers over struggling families queueing at food banks won’t go down well with all those feeling deep despair.

Resolution Foundation also cautions that the large increase in borrowing to fund the mini-budget will also mean higher interest rates, leaving the longer run level of GDP largely unaffected.

The level of growth, or depth of any recession, in the years ahead will be driven far more by the path of energy prices than the level of taxation – with countries opting for both higher (Germany) and lower (US) tax levels outgrowing the UK economy over the past 15 years.

5 – Caution needed on growth: While energy support will boost GDP this winter, the borrowing required will also mean higher interest rates. Growth in the years ahead is likely to be driven far more by the path of energy prices than the tax cuts announced today. pic.twitter.com/AGXWgQSfxG

— Resolution Foundation (@resfoundation) September 23, 2022

Resolution: UK to borrow extra £411bn over next five years

Graeme Wearden

Graeme Wearden

Kwasi Kwarteng’s tax cuts – the biggest in 50 years – will help to drive up borrowing by £411bn over the next five years, the Resolution Foundation have calculated.

Resolution’s early analysis of the mini-budget has found that it will boost growth in the short-term but also lead to higher interest rates.

Resolution has also worked out that almost half of the personal tax cuts confirmed today will go to richest 5% of the population, who will be £8,560 better off.

Someone on an income of £1 million will receive a tax cut worth £55,220 next year, the thinktank has worked out.

In contrast, just 12 per cent of the gains will go to the poorest half of households, who will be £230 better off on average next year.

4 – Almost two-thirds (65%) of the gains from personal tax cuts announced will go to the richest fifth of households: Almost half (45%) will go to the richest 5% alone, while just 12% of the gains will go to the poorest half of households. pic.twitter.com/QxsWFEgLba

— Resolution Foundation (@resfoundation) September 23, 2022

Resolution has calculated that the deterioration of the economic outlook since March, and additional packages of energy support, are estimated to have increased borrowing by £265bn over the next five years.

Tax cuts of £146bn raise that to £411bn over the next five years.

Resolution explains that this will break the UK’s fiscal rules:

While extra borrowing is greatest this year (£130 billion) given the scale of energy bill support, the permanence of the tax cuts combines with higher interest rates and weaker growth to mean that the £30 billion of headroom the previous Chancellor maintained against his fiscal rule of having debt falling as a share of GDP has been blown through twice over by 2026-27.

1 – £45 billion of tax cuts were announced today – going far beyond election promises to cancel corporation tax increases and reverse this year’s National Insurance rise. These are the largest tax cuts to be announced in a single fiscal event since the 1970s. pic.twitter.com/AFELfcsp1c

— Resolution Foundation (@resfoundation) September 23, 2022

2 – A record increase in borrowing: The decision to combine the largely unavoidable higher deficit caused by rising energy prices/interest rates with permanent tax cuts will drive up borrowing by £411 billion in coming years. No Chancellor has increased borrowing by so much. pic.twitter.com/5H4wMcwDHz

— Resolution Foundation (@resfoundation) September 23, 2022

Torsten Bell, Chief Executive at the Resolution Foundation, said:

“This may not have been a Budget, but the Chancellor has certainly blown the budget with the biggest package of tax cuts announced since the ill-fated Barber Budget of 1972. His decision to combine the largely unavoidable higher deficit caused by rising energy prices and interest rates with permanent tax cuts will drive up borrowing by over £400 billion in the coming years. No Chancellor has ever chosen to permanently increase borrowing by so much.

“Without significant cuts to public spending, debt will be on course to rise in each and every year. This is not what sustainable public finances look like. Every scrap of Treasury orthodoxy has been torn up.

“While the Energy Price Guarantee will do an excellent job of softening the living standards squeeze this winter for rich and poor households alike, today’s tax cuts will do little to boost the incomes of those on low and middle incomes. Someone on an income of £1 million will receive a tax cut worth £55,220 next year.

“This borrowing surge will mean higher GDP this winter, but it will also mean higher interest rates as the Bank of England aims to suck out the boost to demand the Chancellor has provided. Even those who believe lower taxes will make a major difference to growth should be cautious about putting all their eggs in that basket. After all, the tax take will remain at levels not sustained since the 1940s – even on these plans.”

These are from the Green party MP Caroline Lucas.

So that’s it. Who are the winners from this budget? Bankers, city fatcats, fossil fuel giants, the extremely wealthy. Who are the losers? Everyone else. And not one word about climate & nature protection, on which all wealth ultimately depends #Bankersbudget

— Caroline Lucas (@CarolineLucas) September 23, 2022

That was vile from @KwasiKwarteng who actually just said “for too long in this country we’ve indulged in a fight over redistribution”
Indulged?
Dealing with inequality is somehow over-generous? Does he think people choose to be poor & face disadvantage? Disgusting#MiniBudget

— Caroline Lucas (@CarolineLucas) September 23, 2022

This budget could have delivered a retrofit revolution to create 140,000 jobs, slash energy bills, cut emissions & benefit the economy by £7 billion a year. Instead we get dogma & deregulation – an environment-wreckers charter to benefit fossil fuel giants & the super-wealthy pic.twitter.com/CGeVxuWtBt

— Caroline Lucas (@CarolineLucas) September 23, 2022

This is from Ashwin Kumar, a modelling expert and professor of social policy at Manchester Metropolitan University.

Jason Rodrigues

Jason Rodrigues

Kwasi Kwarteng’s mini-budget has been compared to the budget presented by Anthony Barber, Tory chancellor in 1972.The resulting ‘Barber boom’, then bust, was deemed reckless. Gripped by sluggish growth and low investment, the UK decided to solve its problems by embarking on a “dash for growth” – spending big and cutting taxes. Barber set growth targets of 10% for the following two years and shaved £1 billion off income tax. His budget did grow the economy but inflation surged. This was worsened by the hike in oil prices following the 1973 Yom Kippur War. Within 18 months Barber did a U-turn, bringing in a deflationary budget, and Edward Heath’s government was forced into introducing an incomes policy (wages freeze).

This is how the Guardian reported it at the time.

Barber boom budget coverage
Barber boom budget coverage Photograph: Guardian

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