Chancellor unveils new growth plan, tackling energy costs to bring down inflation, backing business and helping households.
- Corporation tax rise cancelled, keeping it at 19% as government sets sights on 2.5% trend rate of growth.
- Basic rate of income tax cut to 19% in April 2023 – one year earlier than planned – with 31 million people getting on average £170 more per year.
- Stamp Duty cuts will help people on all levels of the property market and lift 200,000 homebuyers every year out of paying the tax altogether.
The plan set the ambitious target for 2.5% trend of growth, securing sustainable funding for public services and improving living standards for everyone.
The Chancellor of the Exchequer, Kwasi Kwarteng, said:
“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.”
The Chancellor set out plans to tackle the high cost of energy which has driven up inflation. To tackle this the government’s Energy Price Guarantee will save the typical household £1,000 a year on their energy bill with the Energy Bill Relief Scheme halving the cost of business energy bills, reducing peak inflation by about 5 percentage points.
Also revealed were major tax reforms to allow businesses to keep more of their own money, encouraging investment, boosting productivity and creating jobs. New measures include cancelling the planned rise in corporation tax, keeping it the lowest in the G20 at 19%, and reversing the 1.25 percentage point rise in National Insurance contributions, a change which will save 920,000 businesses almost £10,000 on average next year. The Chancellor also announced more relief for businesses by making the Annual Investment Allowance £1 million permanently, rather than letting it return to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.
It was also confirmed that the government is in discussion with 38 local and mayoral combined authority areas in England including Norfolk to set up Investment Zones in specific sites within their area. Each Investment Zone will offer generous, targeted and time limited tax cuts for businesses and liberalised planning rules to release more land for housing and commercial development.
Revealing further tax reforms, Kwasi Kwarteng outlined sector specific support for pubs and hospitality, freezing alcohol duty for another year.
The Chancellor also announced a 1p cut to the basic rate of income tax one year earlier than planned. From April 2023, the basic rate of income tax will be cut to 19% and will mean 31 million people will be better off by an average of £170 per year. Due to the combined impact of the reversal of the HSCL and the reduction of the Income Tax Basic Rate, someone working full time on the current National Living Wage will see a tax cut of over £100.
In a further move to grow the economy, the Chancellor announced plans to accelerate new roads, rail and energy infrastructure. In 2021 it took 65 per cent longer to get consent for major infrastructure projects than in 2012. New legislation will cut barriers and restrictions.
New measures were also announced to help people on low incomes secure more and better paid work. Universal Credit Claimants who earn less than the equivalent of 15 hours a week at National Living Wage will be required to meet regularly with their Work Coach and take active steps to increase their earnings or face having their benefits reduced. This change is expected to bring an additional 120,000 people into the more intensive work search regime. Jobseekers over the age of 50 will also be given extra time with jobcentre work coaches, to help them return to the jobs market. Rising economic inactivity in the over 50s is contributing to shortages in the jobs market, driving up inflation and limiting growth. Returning to pre-pandemic activity rates in the over 50s could boost the level of GDP by 0.5-1 percentage points.
To further support businesses, the Chancellor announced new measures to unlock private investment. The Government will change regulations to increase investment by pension funds into UK assets, benefiting savers and boosting economic growth, and incentivising investment into Britain’s science and tech companies.
The Chancellor will set out his Medium-Term Fiscal Plan on 23 November. The Fiscal Plan will set out further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP in the medium term. The Chancellor also confirmed that there will be a Budget in the Spring, with a further OBR forecast.
Factsheets on each of the major measures can be found here:
- The Growth Plan: Factsheet on cancellation of National Insurance rise and Health and Social Care Levy
- The Growth Plan 2022: Factsheet on Investment Zones
- The Growth Plan 2022: Factsheet on Corporation Tax
- The Growth Plan 2022: Factsheet on Stamp Duty Land Tax
- The Growth Plan 2022: Factsheet on Income Tax
The full document can be found here.
