In this week’s emergency mini-Budget, Chancellor Kwasi Kwarteng plans to reveal a tax-cutting bonanza, which may include expediting a scheduled 1p drop in income tax.
Mr. Kwarteng, according to Whitehall insiders, is drafting a’really punchy’ £30 billion package of measures that will reflect Prime Minister Liz Truss’s aim to make a ‘run for growth’ ahead of the next General Election, which is scheduled to be conducted in the fall of 2024.
Mr. Kwarteng is considering bringing forward Mr. Sunak’s suggestion for a 1p reduction in the basic rate of income tax from 20p to 19p per pound, in addition to Ms. Truss’s promises to reverse the recent increase in National Insurance and to freeze corporate tax.
Mr. Sunak stated in March that this will become effective in two years.
According to the sources, Mr. Kwarteng was also contemplating a ‘knock-out surprise measure’ – characterized as a ‘real rabbit out of the hat moment’ – which has been the topic of extensive, confidential negotiations between Ms. Truss and the Chancellor.
On Friday, Chancellor Kwasi Kwarteng will present an emergency budget to the Commons.
Mr. Kwarteng will present the emergency statement to the House of Commons on Friday as part of one of the most major economic interventions by the British government in the last century.
It is in addition to the £150 billion ceiling on energy costs, which was announced during the first week of the Truss government and will limit annual household expenses to £2,500 for two years.
More than twenty distinct measures are anticipated to be announced in the mini-Budget, including the controversial idea to eliminate the bonus cap for bankers and the elimination of ‘nanny state’ measures such as the sugar tax.
Other potential changes include raising the basic rate of income tax from its current level of £12,571 or the higher rate from its current level of £50,271, as well as increasing tax allowances for married couples and the self-employed.
Allies of Mr. Kwarteng are defiant about ending the bonus cap of twice a banker’s income, despite the political ammo it provides to Labour, on the grounds that boosting economic growth as a whole is a higher priority than reining in individual pay packages.
As one ally expressed it to this publication, if we increase the size of the pie, everyone will receive a larger portion.
Prime Minister Liz Truss is rumored to want a “growth rush” prior to the next general election.
During her bid for Tory leadership, Ms. Truss made it plain that she intended to capitalize on the opportunity presented by Brexit to turbocharge City earnings.
Despite the government’s multibillion-pound spending spree, Mr. Kwarteng’s friends are convinced that the Treasury will be able to adhere to the current fiscal rules, which mandate a decline in the debt-to-income ratio by 2024-25.
Their hopes appear to hinge on the dismal estimates regarding future energy prices proving to be exaggerated and the UK economy proving to be more durable than anticipated — aided by the knock-on benefits of King Charles III’s forthcoming coronation.
Or, Mr. Kwarteng might simply “shift the goalposts” in the upcoming November budget by extending the debt objective into the next legislative term.
The mini-Budget is presented against the backdrop of recent data indicating that the gross domestic product basically stopped in July and inflation is approaching double digits. Mr. Kwarteng will elaborate on the energy cap, which will save a typical household approximately £1,000 beginning on 1 October, when the present consumer price cap was scheduled to grow significantly.