Kwasi Kwarteng prepares mini-Budget costing £2billion every MINUTE
Kwasi Kwarteng prepares mini-Budget costing £2billion every MINUTE that will axes taxes and removes red tape he believes is hampering growth – including tearing up environmental and planning rules in new ‘investment zones’
- The Chancellor will freeze corporation tax and reverse a rise in NICS
- The ‘fiscal event’ is also expected to include plans for ‘investment zones’
- Will have weakened planning and green protection to woo housebuilders
- It could see tens of thousands of homes built in currently protected areas
Kwasi Kwarteng’s mini-Budget tomorrow is expected to cost the taxpayer £2billion for every minute he is on his feet as he unveils a raft of tax cuts and economic reforms.
The Chancellor will freeze corporation tax and reverse a rise in National Insurance Contributions (NICS) as it seeks to boost growth to see off an expected recession.
The fiscal event’ is due to see the biggest tax rate shake up since Margaret Thatcher’s chancellor Nigel Lawson in 1988.
It is also expected to include plans for ‘investment zones’ which will have weakened planning and environmental protection designed to woo housebuilders.
It could see tens of thousands of homes built in currently protected areas, the Telegraph reported. It would include lifting protections for endangered animal species like bats.
They are among a raft of economic changes that the Chancellor will unveil that are expected to cost the taxpayer up to £40billion through extra borrowing for the 20 minutes he is due to speak, according to Sky News.
It came after Liz Truss told bosses of American multinationals last night her tax cuts are ‘just the start’ of a long-term plan to ‘simplify’ Britain’s taxes as she tries to lure investment.
The Prime Minister told leaders of firms including Google, Microsoft and JPMorgan Chase during a New York meeting that she wants ‘lower, simpler taxes’ to attract businesses to Britain.
Ms Truss said Mr Kwarteng will set out ‘a series of supply side reforms’ aimed at boosting productivity and ‘reforming regulations’ so that new businesses are not ‘hit by mountains of red tape’.
‘We’re also going to be introducing low tax investment zones across the country, in parts that are left behind. It’s going to be easier to get things done in those zones,’ she said.
The Chancellor will freeze corporation tax and reverse a rise in National Insurance Contributions (NICS) as it seeks to boost growth to see off an expected recession.
Liz Truss (pictured addressing the UN general assembly) told bosses of American multinationals last night her tax cuts are ‘just the start’ of a long-term plan to ‘simplify’ Britain’s taxes as she tries to lure investment
It could see tens of thousands of homes built in currently protected areas, the Telegraph reported. It would include lifting protections for endangered animal species like bats.
Fracking shake-up: Jacob Rees-Mogg says mining firms must be allowed to cause BIGGER earthquakes
Fracking firms will be permitted to cause bigger earthquakes in a bid to kickstart gas extraction – as the moratorium was lifted in England today.
Jacob Rees-Mogg made clear the limit of 0.5 on the Richter scale will be eased, admitting that otherwise no mining would take place.
The Business Secretary has confirmed the axing of the temporary ban, arguing the move will help bolster energy security following Vladimir Putin’s invasion of Ukraine.
However, Liz Truss has stressed that any projects will require local support – with suggestions that local residents could get discounts on their energy bills in return for agreeing.
The 2019 Conservative manifesto pledged not to lift England’s moratorium unless fracking was scientifically proven to be safe amid concerns over earthquakes.
The government said today that a long-awaited British Geological Survey review had concluded more evidence was needed – and that required more drilling.
The technology has been championed by Mr Rees-Mogg, and Ms Truss has said gas could start being extracted within six months. It is widely used in the US but there are concerns the UK is far more densely populated.
On BBC Newsnight, Mr Rees-Mogg said: ‘The seismic limits will be reviewed to see a proportionate level. 0.5 on the Richter scale, which is only noticeable with sophisticated machinery, it is quite right that fracking would not take place, that level is too low.
‘But I can’t confirm a new level, because that is being looked at.’
Ms Truss hosted the business roundtable discussion as she attended the United Nations General Assembly in New York.
She said the UK has a ‘significant number’ of people who are ‘economically inactive’ following the coronavirus pandemic.
But Ms Truss said Chancellor Kwasi Kwarteng would be scrapping the corporation tax hike, reversing the national insurance increase, and announcing other ‘simplification’ measures.
She said the mini-budget on Friday would ‘get more businesses going in the UK’ and also ‘encourage more people to go into work’.
‘While this is just the start, our long-term plan is to simplify Britain’s taxes and to make us a better place to invest and be unashamedly pro-business,’ the Prime Minister said, according to a transcript provided by No 10.
However Ms Truss also conceded to the business leaders that negotiations to get a post-Brexit free trade deal with the US have stalled.
BlackRock chief executive Larry Fink, Microsoft president Brad Smith and Google finance chief Ruth Porat were all at the meeting, according to No 10.
Ashley Bacon, JPMorgan Chase’s chief risk officer, Boeing Defence’s Theodore Colbert III and Merck boss Rob Davis were also there.
All eyes are on the mini-budget set to be announced by Chancellor Kwasi Kwarteng on Friday, which is expected to put into practice many of the tax-cutting promises made by Ms Truss during the Tory leadership campaign.
Mr Kwarteng is due to set out details of the Government’s plans, including how it will pay for the energy price guarantee for households and businesses, in the so-called ‘fiscal event’.
As well as reversing the hike in national insurance contributions and scrapping a planned increase in corporation tax, which Ms Truss has promised, it has been reported he will cut stamp duty in a further attempt to drive growth.
But Levelling Up Secretary Simon Clarke, a former top Treasury minister, told ITV’s Peston programme that the Government’s economic policy is not ‘risk-free’ as he said that the Government wanted to go back to the growth rates seen before the financial crash in 2008, when Labour was in power.
‘There are no risk-free options when you’re faced with a global crisis of the kind that we’re seeing. Having come straight out of the global pandemic and into the teeth of Russia invading western Europe, these are extraordinary times. But the real risk I think here lies in us being too passive in the face of those challenges, of accepting that we are in this economic low-growth trap,’ he told the programme in a pre-recorded interview.
More than 100,000 people in part-time work could face a benefit cut if they fail to properly look for more work, the Chancellor is set to announce in his mini-budget on Friday.
Among a range of measures set to be revealed by Kwasi Kwarteng, Universal Credit claimants working up to 15 hours a week on the National Living Wage will be required to meet regularly with a work coach and to take ‘active steps’ to increase earnings.
If they fail to do so, under the plan, their benefits could be reduced.
Billed by the Treasury as a gradual expansion, the move will be an increase from the incoming 12-hour threshold for a more intensive work search regime and is expected to take effect from January as part of the Universal Credit system.
Mr Kwarteng has described the policy as a ‘win-win’, pitching it as a way to fill 1.2 million job vacancies across the country.
But Labour lashed out at the plan, which comes amid reports that tomorrow’s ‘fiscal event’ will lift the cap on bankers’ bonuses and ease business taxes.
Shadow work and pensions secretary Jonathan Ashworth said: ‘So Tory ministers think reason we have over a million vacancies is because the low paid aren’t working hard enough and need to be threatened with sanctions but bankers needs bumper bonuses.
‘We need a serious plan to support people to return to work & increase labour supply.’
‘We want to try and achieve escape velocity, we want to recapture the growth rates that we were seeing prior to the 2008 financial crisis.’
In another key week for British politics, Ms Truss is in New York for the UN General Assembly where she is meeting many world leaders, including US president Joe Biden, for the first time as Prime Minister.
On Wednesday, her Government announced another major policy initiative – this time a new scheme ministers said would roughly halve the price paid for wholesale gas and electricity by non-domestic customers, which include schools and charities.
Mr Clarke said that no Conservative Government ‘has had a clear run at events over the entire course of the last decade, it has been one crisis after another’.
The comments are likely to raise some eyebrows, with his party in Government since 2010.
During the race to replace Boris Johnson, the opposition Labour Party delighted in the contest as the candidates clashed, and sometimes explicitly criticised, the record of their own party in government.
‘What Liz is saying is that we need to accept that we may not get back to normal, that if you like, that the world is in an extraordinary state of affairs at the moment and that being so, that we just need to press on and govern, frankly, as we want to be remembered – as a government that makes things better for people,’ Mr Clarke said.
‘And clearly as Secretary of State for Levelling Up, my focus is on life chances, and on spreading opportunity. I’m delighted that we’re moving to an unashamedly pro-growth policy.’
Earlier, a leading economic think tank said that Ms Truss’s plans risk putting the public finances on an ‘unsustainable path’.
The Institute for Fiscal Studies (IFS) has calculated that the combination of higher spending and tax cuts means Government borrowing is set to hit £100 billion a year – more than double the official forecasts last March.
With debt potentially set on an ‘ever-rising path’, the IFS said the Government’s claim that reducing tax rates would lead to sustained economic growth was ‘a gamble at best’.
IFS deputy director Carl Emmerson said: ‘Under the new Prime Minister’s plans, the fiscal targets legislated in January would be missed and while we would get to enjoy lower taxes now, ever-increasing debt would eventually prove unsustainable.’
Despite the scale of the changes, and the worsening outlook for the economy, the IFS said it was ‘disappointing’ that the Office for Budget Responsibility would not be producing a new set of economic forecasts alongside the Chancellor’s statement.
It said the final bill for the energy price cap was ‘highly uncertain’ and while they were working on an assumption that it could be £100 billion over the next two years, it could turn out to be much higher or much cheaper.
The reduction in revenue from the changes to national insurance and corporation tax however was much clearer, costing the Exchequer around £30 billion a year.
At the same time rising inflation was pushing up spending on debt interest as well as state pensions and most working age benefits, while Ms Truss has also pledged to increase defence spending to 3 per cent of national income by the end of the decade.
As a result, the IFS said that even after the energy price guarantee is assumed to have expired in October 2024, borrowing would be running at around £100 billion a year – more than £60 billion higher than was forecast in March.
At around 3.5 per cent of national income, that would leave borrowing not far off double the 1.9 per cent it averaged in the 60 years to the global crash in 2008.
Almost half this increase would be due to the tax cuts – while if they do not go ahead the current budget would be forecast to remain in balance.
The prospect of persistent deficits in the current budget and debt rising as a share of national income means both the main fiscal targets set in January will have been missed, the IFS said.
‘Allowing debt to rise temporarily to finance one-off packages of support, such as the energy price guarantee or the furlough scheme, in exceptional circumstances is justifiable and can be sustainable, but the same case cannot be made for allowing debt to rise indefinitely in order to enjoy lower taxes now,’ it said.
While Ms Truss and Mr Kwarteng argue that higher growth will lead to higher revenues, the IFS said the economy would have to grow by an additional 0.7 per cent a year to 2026-27 just to stabilise debt as a proportion of national income.
To put it in context, the IFS said it was equivalent to the difference in growth rates in the 25 years from 1983 to 2008, when the economy was expanding at an average of 2.8 per cent a year, and the 2010s when growth was averaging 2.0 per cent.
‘Finding a way to somehow boost the UK’s rate of economic growth would undoubtedly help. But we shouldn’t underestimate the scale of the challenge,’ it said.
‘There is no miracle cure, and setting plans underpinned by the idea that headline tax cuts will deliver a sustained boost to growth is a gamble, at best.’
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