The Mini Budget

So first let's talk about what was announced in the (not really, but we all know it is) budget. Yesterday our new Chancellor Kwasi Kwarteng talked in the house of commons about what the new government is going to do to help with the cost of living crisis. 

Income Tax

Cut in the basic rate of income tax to 19% from April 2023

The government estimates 31 million people will get £170 a year more

Currently, people in England, Wales and Northern Ireland pay 20% on any annual earning between £12,571 to £50,270 - rates in Scotland are different

45% higher rate of income tax abolished for England, Wales and Northern Ireland taxpayers

One single higher rate of income tax of 40% from April next year

National Insurance

Reversed the recent rise in National Insurance (NI) from 6 November

Workers and employers have paid an extra 1.25p in the pound since April on National Insurance

The New Health and Social Care Levy to pay for the NHS will not be introduced

Corporation tax

Cancel UK-wide rise in corporation tax which was due to increase from 19% to 25% in April 2023

Benefits

Rules around universal credit tightened, by reducing benefits if people don't fulfil job search commitments

Around 120,000 more people on Universal Credit to be asked to take steps to seek more work, or face having their benefits reduced

Jobseekers over 50 to be given extra time with work coaches to help them return to the job market

Work and investment

IR35 rules - the rules which govern off-payroll working - to be simplified

Annual investment allowance, the amount companies can invest tax-free, remains at £1m indefinitely

Regulations change so pensions funds can increase UK investments

New and start-up companies are able to raise up to £250,000 under the scheme giving tax relief to investors

Share options for employees doubled from £30,000 to £60,000

Stamp duty

Cut to stamp duty which is paid when people buy a property in England and Northern Ireland

No stamp duty on the first £250,000 and for first-time buyers that rises to £425,000 - comes into operation today

200,000 more people will be taken out of paying stamp duty altogether, the government claims

Energy

The Freeze on energy bills, which the government claims will reduce inflation by 5 percentage points

The total cost for the energy package is expected to be around £60bn for the six months from October

Bankers' bonuses

Rules which limit bankers' bonuses scrapped

Package of regulatory reforms to be set out later in the autumn

Shopping

VAT-free shopping for overseas visitors

Planned increases in the duties on beer, cider, wine, and spirits have been cancelled

Infrastructure and investment zones

Government discussing setting up investment zones with 38 local areas in England

Tax cuts and liberalised planning rules are to be offered to release land for housing and commercial use

Investment zones offered measures such as no business rates and stamp duty waived

New legislation to cut planning rules, and get rid of EU regulations and environmental assessments in an effort to speed up building

So, what is there to say. The tories have always told us they are the party of fiscal stability, the party that can be trusted with the public purse. That no matter how tough things get, they will be the party to save us from financial oblivion, the party without the magic money tree. 

But, as we can see, suddenly the tories do not only have a magic money tree but a whole fucking orchard. They are throwing the whole Conservative rulebook out the window and appear to be going the route of fuck the next generation, spend all the money and it will be someones else's problem. I have to say it is quite a surprise. 

It seems that the new tory government are willing to dip into the purse, but we need to look into what they are planning. Are they spending all this money from the magic money trees to ensure those most in need in society are taken care of? Is this money being sent to the most needy, those in poverty, those that are going to be facing the question of heating or eating. 

No, they are giving tax relief to those most wealthy in our society. We are seeing the tories once again, making the fucking rich, richer and giving the lowly peasants breadcrumbs. Once again we see the blue party ensuring their usual voting base is well off while telling the people they are the saviours of the common folk. Yet we see things such as bankers bonuses no longer being capped? We see the 45% tax rate being abolished. 

The tories think giving the vast majority of people, a 1% tax cut on the basic rate is a fair compromise. They think while seeing vast increases in costs, from food to fuel, energy to services, that a simply 1% decrease is something that we should be celebrating. On top of that we are seeing a stamp duty decrease, now, I am not, in principle, against this. But, is it really worth it. Every single pound that they decrease in taxes, levies, stamp duties etc will be taken on as national debt. 

This national debt is on top of the great amount of debt that we had to take on due to the covid pandemic. We are already at a debt level not seen for over 60 years. This is bad enough but we will then be adding SIXTY BILLION to our national debt from the energy price cap alone. Where is this money coming from, the pockets of our children, and probably their children too? 

At some point, this debt will need to be paid off, and with the pound being at the lowest it has been against the dollar also for over 60 years, it has to be asked, is this a good idea. Is it a good idea to be borrowing right now, at higher costs while our own currency is faltering in a way we haven't seen since the middle of the last century?

The idea is to drive investment and growth into the UK, and with a weak pound, and low taxes this could possibly work out. But it's a big IF. As I said in the last post on this blog, this is a Hail Mary. This is one of those plays that you see in a desperate country with a desperate leadership. The type of fiscal policy that one would expect to see in the likes of Venezuela a decade ago. Not in one of the top economies of the world. 

Many people would see this as a gamble, and I hope for us all that this is a gamble that will pay off. 

Thanks for reading,

Spec.