“The UK is behaving a bit like an emerging market turning itself into a submerging market” – Larry Summers (former US Treasury Secretary)

Welcome to the supplement in “back to earth” week (following hiatus week last week). Oh wow. Stop the ride I want to get off. The roundabout, the whirligig, the trebuchet, the slings and arrows of outrageous misfortune? For many months in the recent turbulent times I have waxed lyrical about the comparatively competent and sometimes excellent performance of now ex-ex-Chancellor, Rishi Sunak. Mr Sunak’s demise was ultimately being painted as a backstabber, luxury “rich boy”, and the mud stuck, seeing him give way to Ms Truss in his attempt to take the very top job as Prime Minister. 

They’ve both got 5 letters in their name and both begin with T – and both have amusing alternate meanings!

We are now in a new era though. There will be names for this era. This week “Reaganomics” and “Voodoo Economics” have both been broken out of retirement. I find this more likely to be the result of a plant or theoretically “clever” job by the Government PR machine – rather than a truly accurate comparison. Yes; there are similarities – but why are we ignoring the very clear and obvious comparison to Mr Trump and his tax cuts of 2017? Both are a giveaway to those with the most – I steer clear of ideology wherever possible, preferring to make decisions based on fact, numbers, trends, data and sensibility, in both business and broader life, and this regime seems not to agree with me but instead prefer a Trumpian style. 

A small summary of the tidbits that we’ve received so far. I will be referring, today, a number of times, to the bond markets. These vastly liquid (Over $325 trillion) markets, worldwide, are notorious for their sensitivity, predictive powers, and sharpness – alongside their reactivity to political and economic events. These markets did not welcome the new PM and gave a near-immediate vote of no confidence, with rising yields (so the cost of borrowing money goes up, and the rewards for saving money also goes up). 

KamiKwasi

Since then, her Chancellor Mr Kwarteng (or KamiKwasi, a nickname I expect might stick) refused to publish the work done by the independent body the Office for Budget Responsibility (OBR) – the OBR is usually given 12 clear weeks to plan for a fiscal event, whereas the ex-Chancellor Mr Zahawi started the OBR preparing for the event this week (without knowing the date, back then, or indeed who would be Chancellor) on 29th July. The chair of the Treasury committee (Mel Stride, Conservative MP for Central Devon) and the rest of the committee were utterly clear about the importance of doing this to calm international markets including primarily the bond market – since the bond market sets the price of Government borrowing (effectively). 

This, again, feels Trumpian to me. All the advice says “do this”, but no, I’ll do that thanks. The articles which existed across all political factions of the press were quite clear in the probable outcome, and indeed Cable (the handle for the £/$ exchange rate) has been extremely active as sterling has weakened considerably. The £ is down 7% against the $ in the past month, and lost 3% on Friday alone. They were told – and they ignored. This does not bode well for people at the tiller of a £2 trillion business.

The bond yields on the 5-year, my preferred proxy for the mortgage market as that’s the most common timescale to fix over, especially in times like this – have moved from a shade over 1.5% in early August to over 4% as I write this (4.052% to be precise). That is galactically massive and has further implications – and isn’t done yet in my view. 

The credit rating of the UK

Why? Why such a large move? That’s always the best question in these situations. Well, the bond investors are saying they want to stay clear of sterling – with the currency weakening, with the future not looking at all bright, this is no surprise. I caused somewhat of a stir midweek on social media by revealing my opinion on something that’s been concerning me ever since Ms Truss was confirmed as the winner of the leadership election – that the UK’s credit rating is in clear and present danger here. This is what the market is saying, or causing, almost a self-fulfilling prophecy.

So what? What if the credit rating DOES get downgraded? Well, simply put, it costs more to borrow money. The “fiscal drag” – the bite of GDP/tax revenues that goes towards servicing the debt goes up, and suppresses available Government funds for the future. It is fairly obvious that this is not good – not good at all. 

The mini-budget/”fiscal event” – piece by piece

I’d like to give a blow-by-blow account of the speech from KamiKwasi and I’m going to do that below, focusing on the language and the reasoning as I currently see it – and, of course, the results that I would expect. The speech is in italics, with my comments in bold italics as I’ve deemed appropriate:

Mr Speaker,

Let me start directly with the issue most worrying the British people – the cost of energy.

People will have seen the horrors of Putin’s illegal invasion of Ukraine.

They will have heard reports that their already-expensive energy bills could reach as high as £6,500 next year.

Mr Speaker, we were never going to let this happen.

The Prime Minister has acted with great speed to announce one of the most significant interventions the British state has ever made.

People need to know that help is coming.

And help is indeed coming.

We are taking three steps to support families and businesses with the cost of energy.

Firstly, to help households, the Energy Price Guarantee will limit the unit price that consumers pay for electricity and gas.

This means that for the next two years, the typical annual household bill will be £2,500.

For a typical household, that is a saving of at least £1,000 a year, based on current prices.

We are continuing our existing plans to give all households £400 off bills this winter.

So taken together, Mr Speaker, we are cutting everyone’s energy bills by an expected £1,400 this year. This is a truly poor framing of the situation. On March 31st 2022 the average household had an energy bill of £1,277. £2,100 is an increase of around 64.5% in just over 6 months. This is seriously painful to those on fixed incomes, and those who have received below-inflation pay rises this year.  

And millions of the most vulnerable households will receive additional payments, taking their total savings this year to £2,200.

Secondly, as well as helping people, we need to support the businesses who employ them.

The Energy Bill Relief Scheme will reduce wholesale gas and electricity prices for all UK businesses, charities, and the public sector like schools and hospitals.

This will provide a price guarantee equivalent to the one provided for households, for all businesses across the country. This is sensible and I think will continue but in a more targeted fashion after 31st March 2023. We knew this already.

Thirdly, energy prices are extremely volatile, erratically rising and falling every hour.

This creates real risks to energy firms who are otherwise viable businesses.

Those firms help supply the essential energy needed by households and businesses.

So to support the market, we are announcing the Energy Markets Financing Scheme.

Delivered with the Bank of England, this scheme will provide a 100% guarantee for commercial banks to offer emergency liquidity to energy traders. This sounds like it makes sense – as long as there is no bad behaviour incentivised to take one-way bets, but you would hope checks and balances are in place to ensure that doesn’t happen….

Mr Speaker,

The consensus amongst independent forecasters is that the Government’s energy plan will reduce peak inflation by around 5 percentage points. This is true, but this is a trap. The peak is one thing – the duration is another. Inflation will now be stronger for longer, and the overall impact and cost will be higher. We have a history in the UK of not taking our medicine, and this is one further example – however, many lives would have been lost this winter that are now likely saved by this policy – overall I’m in favour but this cannot be claimed as a “win” without true context.

It will reduce the cost of servicing index-linked government debt and lower wider cost of living pressures. The “cashback” point is a valid one and this measure will likely save the government £25 billion or more in index-linked payments earlier in the process, but can’t really be counted as a saving since the payments will, in isolation, stay higher for longer. Saving the jobs that the energy price cap does save, however, is likely a good move just as furlough was a good move. Not enough to get all the money back though, of course.

And it will help millions of people and businesses right across the country with the cost of energy.

Let no one doubt: during the worst energy crisis in generations, this Government is on the side of the British people. Hmm. Partially the crisis has been caused by austerity and chronic underfunding of energy storage, when we get our sources of energy, other than the renewables, from some of the bad actors on the world stage. We are not alone in this of course.

I’m utterly frustrated that that’s the end of the energy section here, once again not addressing the weak energy strategy that’s led to these problems occurring, nor laying out any short term tactical solutions that should have been being put into place from as soon as Russia put a boot over Ukrainian borders (or ideally earlier than that of course). 

The Bank of England are taking further steps to control inflation, acting again only yesterday.

I can assure the House, this Government considers the Bank of England’s independence to be sacrosanct. This had to be said because this was poorly communicated during the campaign, and also poorly understood. “Reviewing the Bank’s mandate” does not mean bringing the Bank back under direct political control – it is a legitimate request which, in my view, would be a waste of time – but it is a legitimate request. I doubt there’s a better mandate than getting inflation back under control – I myself called for an adjustment in the inflation target last year, to no avail.

And we remain closely coordinated, with the Governor and myself speaking twice a week.

But Mr Speaker,

High energy costs are not the only challenge confronting this country.

Growth is not as high as it should be. This is true, but austerity has to shoulder a considerable amount of the blame. In second place would be Brexit – solely from an evidence-based perspective, more friction in trade and the absence of trade deals worsens the trade deficit, which is now at its worst rate on record. 

This has made it harder to pay for public services, requiring taxes to rise.

In turn, higher taxes on capital and labour have lowered returns on investment and work, reducing economic incentives and hampering growth still further. This isn’t an accurate representation of the order of play since 2010. 

This cycle has led to the tax burden being forecast to reach the highest levels since the late 1940s – before even Her Late Majesty acceded to the throne. True.

We are determined to break that cycle.

We need a new approach for a new era, focused on growth.

Our aim, over the medium term, is to reach a trend rate of growth of 2.5%. This, depressingly, is quite ambitious. 

And our plan is to expand the supply side of the economy through tax incentives and reform. This is not incorrect by definition – and can work. 

That is how we will deliver higher wages, greater opportunities, and crucially, fund public services, now and into the future. 

That is how we will compete successfully with dynamic economies around the world.

That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth.

So as a Government, we will focus on growth – even where that means taking difficult decisions. 

None of this is going to happen overnight. But today we are publishing our Growth Plan that sets out a new approach for this new era, built around three central priorities:

• Reforming the supply-side of the economy.

• Maintaining responsible approach to public finances

• And cutting taxes to boost growth.

Tax cuts that do boost growth should definitely be supported. There’s no evidence of a responsible approach yet at all – they are trying to take Sunak’s credibility just by virtue of being in the same party, and the bond markets are simply not buying it. Where’s the evidence? Concentrating on the supply side does make sense if inroads can actually be made – but I fear abject failure on this one. Perhaps I should be more charitable and give them a chance; after all, it is a chance they will have.

Mr Speaker,

The UK has the second-lowest debt to GDP ratio of any G7 country. True. Great. Again – however it is at least as important to look at the cost of that debt – the deficit – and that cost is currently 8% of GDP, putting us not far off Japan who have more than double our Debt to GDP ratio, and 5th of the G7 with the US being at a ridiculous deficit level. 

In due course, we will publish a Medium-Term Fiscal Plan, setting out our responsible fiscal approach more fully. This better be good, pal. 

Including how we plan to reduce debt as a percentage of GDP over the medium term.

And the OBR will publish a full economic and fiscal forecast before the end of the year, with a second to follow in the new year. And the answer will be growth. That makes sense. If we COULD grow at 2.5% per year that would be £50 billion a year, and it would compound of course as well – one parliamentary 5-year term with that growth rate would likely add nearly £300 billion to the GDP of the UK. The hope of this lies between Bob Hope and No Hope, I’m afraid. 

Fiscal responsibility remains essential for economic confidence, and it is a path we remain committed to. Pleased to be hearing this. It is not “just” essential – it is CRITICAL. 

Today we are publishing costings of all the measures the Government has taken.

And those costings will be incorporated into the OBR’s forecast in the usual way. Not before time. 

The House should note that the estimated costs of our energy plans are particularly uncertain, given volatile energy prices. Impossible to deny. 

But based on recent prices, the total cost of the energy package, for the six months from October, is expected to be around £60bn. Let’s see. 

We expect the cost to come down as we negotiate new, long term energy contracts with suppliers. Let’s hope this can be done and this is a sensible move for energy security and business continuity on all sides. 

And, in the context of a global energy crisis, it is entirely appropriate for the government to use our borrowing powers to fund temporary measures in order to support families and businesses. It was the only option, the least worst. 

That’s what we did during the Covid-19 pandemic.

A sizeable intervention was right then…and it is right now. I still think the better distinction would be to continue the pandemic narrative – Covid-19 may not be the threat to life, but its effects are. 

The heavy price of inaction would have been far greater than the cost of these schemes. It was true with furlough, and almost certainly is true here as well. But the cost is huge. 

Mr Speaker,

We are at the beginning of a new era.

As we contemplate this new era, we recognise that there is huge potential in our country.

We have unbounded entrepreneurial drive.

We have highly skilled people.

We have immense global presence in sectors like finance, life sciences, technology, and clean energy. I love this country and I enjoyed those statements!

But Mr Speaker, there are too many barriers for enterprise. We need a new approach to break them down. That means reforming the supply side of our economy. Free market unfettered capitalism is NOT great for the country – especially at this stage when inflation, which impacts lower-income families far more, is now effectively accepted to be stronger for longer. I am in favour of light touch regulation, but for regulators to have proper teeth and prevent behaviour that is solely about the pursuit of money which includes significant negative externalities for society. 

Over the coming weeks, my Cabinet colleagues will update the House on every aspect of our ambitious agenda.

Those updates will cover: the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure. Could be great, but unlikely to be. Will be listening with interest on all of these of course. 

And Mr Speaker, we start this work today. A poor choice of words really – we’d hope that the work had already been started…….I’m sure he’s referring to the work on updating the House, but a poor choice of words nonetheless. 

An essential foundation of growth is infrastructure.

The roads, railways, and networks that carry people, goods, and information all over our country.

Today, our planning system for major infrastructure is too slow and fragmented.

The time it takes to get consent for nationally significant projects is getting slower, not quicker, while our international competitors forge ahead.

We have to end this. Johnson/Sunak were also big on this – and this should be a strategic pillar of UK PLC’s strategy. 

We can announce that in the coming months, we will bring forward a new Bill to unpick the complex patchwork of planning restrictions and EU-derived laws that constrain our growth. Listen folks – we’ve heard this one before but these guys DO seem serious about deregulation, so maybe this WILL be the time – although you don’t keep the Blue Belt happy by allowing people to build in the home counties, that much is self-evident.

We will streamline a whole host of assessments, appraisals, consultations, endless duplications, and regulations. Let’s see it and let’s be positive about it!

We will also review the government’s business case process to speed up decision making.

And today, we are publishing a list of infrastructure projects that will be prioritised for acceleration, in sectors like transport, energy, and telecoms. Acceleration – good and sensible. Will be needed to counteract the incoming recession. 

And, to increase housing supply and enable forthcoming planning reforms, we will also increase the disposal of surplus government land to build new homes. Well this will be seen as selling off the family silver, but if it IS surplus – why not?

Mr Speaker, we are getting out of the way to get Britain building.We already know we don’t have the skills, labour, or material – nor are SME developers encouraged in any way shape or form. Let’s see if THIS changes. 

Mr Speaker,

One of the proudest achievements of our government is that unemployment is at the lowest level for nearly fifty years.

But with more vacancies than unemployed people to fill them, we need to encourage people to join the labour market.

We will make work pay by reducing people’s benefits if they don’t fulfil their job search commitments. Sounds brutal, would love to think it will fix the problem – will likely break more people and increase the social sector however; very possible this is an ideological position rather than a practical/economically prudent one; it’s nice to think this COULD be done, but I am very skeptical. 

We’ll provide extra support for unemployed over-50s. This sounds promising. 

And we’ll ask around 120,000 more people on Universal Credit to take active steps to seek more and better paid work, or face having their benefits reduced. Definitely a daily mail readership vote winner – regardless of the impact of it. 

And, Mr Speaker,

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. At least a third of normal service levels are required in Romania. Can’t find many more examples of these – Slovenia treats all civil servants as a uniform category for minimum service levels. 

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. This will cost time and money. And add to the gamesmanship. Let’s see what happens. Will they go yet further? There have been suggestions that they will. I have genuine fears of social unrest as the next level beyond strikes – and certain pockets that are GENUINELY being hard done by here mean we have “pitchfork” exposure. This is a fine balance and a dangerous situation.

Of course, Mr Speaker, to drive growth, we need new sources of capital investment.

To this end, I can announce that we will accelerate reforms to the pension charge cap so that it will no longer apply to well-designed performance fees.

This will unlock pension fund investment into UK assets and innovative, high growth businesses.

It will benefit savers and increase growth. This is a start – it won’t be fast as the pension market adjusts, because nothing in the pension market is fast!

And, we will provide up to £500 million to support new innovative funds and attract billions of additional pounds into UK science and technology scale-ups. This could in theory be money well spent, as long as the deployment rules are intelligent. 

And Mr Speaker, this brings me to the cap on bankers’ bonuses.

A strong UK economy has always depended on a strong financial services sector.

We need global banks to create jobs here, invest here, and pay taxes here in London, not Paris, not Frankfurt, not New York.

All the bonus cap did was to push up the basic salaries of bankers, or drive activity outside Europe.

It never capped total remuneration, so let’s not sit here and pretend otherwise.

So we’re going to get rid of it. This is a good thing. There’s no point to Brexit if we don’t do things like this (not that it needed Brexit to happen to do this; this is a more general point). 

And to reaffirm the UK’s status as the world’s financial services centre, I will set out an ambitious package of regulatory reforms later in the Autumn. As long as casino banking behaviour remains genuinely discouraged – this is fine. That’s a worry of course.

But Mr Speaker,

To support growth right across the country, we need to go further, with targeted action in local areas.

So today, I can announce the creation of new investment zones. This is promising and I’d be in full support of this, if well-deployed.

We will liberalise planning rules in specified agreed sites, releasing land and accelerating development. This makes a lot of sense for levelling up. 

And we will cut taxes.

For businesses in designated tax sites, for ten years, there will be:

Accelerated tax reliefs for structures and buildings. Tax relief is the best way to go – there’s no tax from things that don’t exist, so nothing is being sacrificed. 

And 100% tax relief on qualifying investments in plant and machinery. Same logic.

On purchases of land and buildings for commercial or new residential development, there will be no stamp duty to pay whatsoever. Frictional costs hurt transactions – good. Particularly on new commercial properties – business rates are a continuous stream of income – get them built ASAP as long as they are appropriate, and needed. Great idea. 

On newly occupied business premises, there will be no business rates to pay whatsoever. Would want some further detail here – a break for the first year/few years? Again, smart. 

And if a business hires a new employee in the tax site, then on the first £50,000 they earn…

…the employer will pay no National Insurance whatsoever. Good for everyone realistically. 

That is an unprecedented set of tax incentives for business to invest, to build, and to create jobs right across the country. This is the only part of this speech that really gave me any confidence and hope. I know I’m bloody miserable…….

I can confirm for the House that we’re in early discussions with nearly 40 places like Tees Valley, the West Midlands, Norfolk and the West of England to establish Investment Zones.

And we’ll work with the devolved administrations and local partners to make sure Scotland, Wales and Northern Ireland will also benefit, if they are willing to do so. Hostile choice of language really – one more thing being accelerated here is likely the break up of the union – that really wasn’t called for, but there we go. The zones chosen contain deprivation and they are obvious ones for levelling up. At least one is a significant labour heartland too – so this shows a lack of cynicism. West Mids is 50/50 – South West is heavily Blue, as is Norfolk; North West is a strong labour heartland. So it does depend what “West of England” means, of course (Labour lead 42-31 in North West constituencies). 

If we really want to level up, Mr Speaker – we have to unleash the power of the private sector. This, ultimately, is correct. 

And now, Mr Speaker, we come to tax – central to solving the riddle of growth.

The tax system is not simply about raising revenue for public services, vitally important though that is. Tax determines the incentives across our whole economy. Ummm. Yes, I suppose so. This might sound a bit frivolous to fiscal conservatives, maybe. 

And we believe that high taxes reduce incentives to work, they deter investment and they hinder enterprise. This is self-evidently true, if tax is 100% (and we’ve been close) the incentives are destroyed of course. 

As the Prime Minister has said, we will review the tax system to make it simpler, more dynamic, and fairer for families. Heard it all before, so many times. 

And we are taking that first step today. Have they? 

Mr Speaker,

The interests of businesses are not separate from the interest of individuals and families.

In fact, it is businesses that employ most people in this country.

It is businesses that invest in the products and services we rely on.

Every additional tax on business is ultimately passed through to families through higher prices, lower pay, or lower returns on savings. Will the populace buy this argument? Is it true? Does it not just mean more money in business owners’ pockets?

So I can therefore confirm that next year’s planned increase in Corporation Tax will be cancelled.

The UK’s corporate tax rate will not rise to 25% – it will remain at 19%.

We will have the lowest rate of Corporation Tax in the G20.

This will plough almost £19bn a year back into the economy.

That’s £19bn for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions. Let’s see what happens to this £19bn and base it on results. 

I’ve already taken steps elsewhere in this statement to support financial services, so the Bank Surcharge will remain at 8%. So this isn’t a complete giveaway then. Phew.

But, Mr Speaker, we will do more to encourage private investment.

The Annual Investment Allowance, which gives 100% tax relief on investments in plant and machinery, will not fall to £200,000 as planned…

It will remain at £1m.

And it will do so permanently. This makes sense.

Our duty is to make the UK one of the most competitive economies in the world – and we are delivering. Not yet you aren’t. Let’s hope you do. 

And Mr Speaker,

We want this country to be an entrepreneurial, share-owning democracy.

The Enterprise Investment Scheme. The Venture Capital Trusts. We will extend them beyond 2025.

The Seed Enterprise Investment Scheme. Company Share Option Plans. We will increase the limits to make them more generous. This is all promising. 

Crucial steps on the road to making this a nation of entrepreneurs.

Mr Speaker,

For the tax system to favour growth, it needs to be much simpler.

I’m hugely grateful to the Office of Tax Simplification for everything they have achieved since 2010.

But instead of a single arms-length body which is separate from the Treasury and HMRC, we need to embed tax simplification into the heart of Government.

That is why I have decided to wind down the Office of Tax Simplification, and mandated every one of my tax officials to focus on simplifying our tax code. Well. Is this because the OTS recommendations are rarely implemented? It is rarely regarded as a success. This is likely no particular drama. 

To achieve a simpler system, I will start by removing unnecessary costs for business.

Firstly, we will automatically sunset EU regulations by December 2023, requiring departments to review, replace or repeal retained EU law.

This will reduce burdens on business, improve growth, and restore the primacy of UK legislation. In the context of Brexit, this “sounds like” it makes sense. 

Mr Speaker, we can also simplify the IR35 rules – and we will.

In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses.

So, as promised by My RHF the Prime Minister, we will repeal the 2017 and 2021 reforms.

Of course, we will continue to keep compliance closely under review. This is chunky for many contractors and firms struggling to attract international talent at this time. This is likely to be good news. 

Mr Speaker,

Britain welcomes millions of tourists every year, and I want our high streets and airports, our ports and our shopping centres, to feel the economic benefit.

So we have decided to introduce VAT-free shopping for overseas visitors.

We will replace the old paper-based system with a modern, digital one.

And this will be in place as soon as possible.

This is a priority for our great British retailers – so it is our priority, too. This makes sense particularly with a weak £. There will be a significant incentive to come to London with such changes and bring significant monies into the country from the world’s wealthiest. Plenty of tax will be captured on hotels and accommodation, and other associated spending.  

Our drive to modernise also extends to alcohol duties.

I have listened to industry concerns about the ongoing reforms.

I will therefore introduce an 18-month transitional measure for wine duty.

I will also extend draught relief to cover smaller kegs of 20 litres and above, to help smaller breweries.

And, at this difficult time, we are not going to let alcohol duty rates rise in line with RPI.

So I can announce that the planned increases in the duty rates for beer, for cider, for wine, and for spirits will all be cancelled. This is sensible but simply not enough for the struggling sector in my view. 

Now, Mr Speaker, we come to the question of personal taxation.

It is an important principle that people should keep more of the money they earn. And it is good policy to boost the incentives for work and enterprise.

Yesterday, we introduced a Bill that means the Health and Social Care Levy will not begin next year… it will be cancelled.

The increase in Employer National Insurance Contributions and dividends tax… will be cancelled.

And the interim increase in the National Insurance rate, brought in for this tax year…will be cancelled.

And this cut will take effect from the earliest possible moment, November 6th.

Reversing the Levy delivers a tax cut for 28 million people, worth, on average, £330 every year; This is really quite disingenuous because this was a progressive tax, which should be favoured – the lower paid will feel nearly nothing at all from this. 

A tax cut for nearly a million businesses;

And I can confirm: the additional funding for the NHS and social care services will be maintained at the same level. Ah, the magic money tree. No words about how this can happen or will be achieved?

Mr Speaker,

I have another measure.

Today’s statement is about growth.

Home ownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society.

So to support growth, increase confidence, and help families aspiring to own their own home, I can announce that we are cutting stamp duty. Waheyyyyy!

In the current system, there is no stamp duty to pay on the first £125,000 of a property’s value.

We are doubling that – to £250,000.

First time buyers currently pay no stamp duty on the first £300,000.

We’re increasing that threshold as well, to £425,000.

And we’re going to increase the value of the property on which first time buyers can claim relief, from £500,000 to £625,000.

The steps we’ve taken today mean 200,000 more people will be taken out of paying stamp duty altogether. 

This is a permanent cut to stamp duty, effective from today. Limited impact for investors and companies ultimately (directly). The market will benefit – keeping the fire burning just in time for the election, you’d think. Not before time though – Wales are much fairer on their devolved LTT (land transaction tax) and Scotland now go to the most expensive part of the UK to buy property from a frictional costs point of view thanks to the LBTT system (although ultimately, properties are more expensive on average in England than the other two devolved nations). 

Indirectly however – this is significant in terms of keeping the market ticking over. At an extreme example, on a 95% mortgage the £11,250 savings could be multiplied by up to 20, meaning the same deposit monies could buy a house that is up to £225k more expensive than last week. This obviously fuels credit availability and addresses the number one difficulty in getting on the property ladder in the first place – the saving of the deposit.

This is likely only to counteract the FTB problems from higher interest rates, and/or pending unemployment or uncertainty – but, there are definitely fewer reasons to be bearish on UK house prices in the immediate future – of that there is no doubt. 

For those wondering, I’ve seen some poor interpretations of the additional 3% – that one that we all care about. It hasn’t changed – it still kicks in at £40,000. So, the saving for investors is £2,500 for properties at £250k or above (are those investment grade at all anymore? They are for cash buyers, potentially, of course! Also helpful for HMO purchasers……if anyone wants to take on any utility bills these days, of course. Good for social HMOs in higher value areas though…..) 

And Mr Speaker,

I have another measure.

High tax rates damage Britain’s competitiveness.

They reduce the incentive to work, invest, and start a business.

And the higher the tax, the more ways people seek to avoid them, or work elsewhere or simply work less…

…rather than putting their time and effort to more creative and productive ends.

Take the additional rate of income tax.

At 45%, it is currently higher than the headline top rate in G7 countries like the US and Italy.

And it is higher even than social democracies like Norway.

But I’m not going to cut the additional rate of tax today, Mr Speaker.

I’m going to abolish it altogether.

From April 2023, we will have a single higher rate of income tax of 40 per cent.

This will simplify the tax system and make Britain more competitive.

It will reward enterprise and work.

It will incentivise growth.

It will benefit the whole economy and whole country. Just not sure the 92% will swallow this…..

And, Mr Speaker, after all, this only returns us to the same top rate we had for 20 years. This is not likely to matter to those on under £150k a year. 92% of the population. On the bright side this is not particularly inflationary, as those who do earn at this level are not as prone to spending this marginal 5% extra on their income. Jolly good if you have a salary of over £150k. Looks like a good old-school tax giveaway. Also it is still disingenuous – the top rate of income tax is 60% on all earnings between £100k and £125,140 due to the reduction of the personal allowance. 

And that’s not all.

I can announce today that we will cut the basic rate of income tax to 19p in April 2023 – one year early. A nice votewinner thrown in there. 

That means a tax cut for over 31 million people in just a few months’ time. Well, this IS inflationary – but the amount of those 31 million dragged into the higher rate bracket by the frozen tax bands is significant; millions and millions. Let’s see if they move THOSE at the actual budget later in the year.

This means we will have one of the most competitive and pro-growth income tax systems in the world. Not sure this is true at 40% + NI…….evidence?

Mr Speaker,

For too long in this country, we have indulged in a fight over redistribution.

Now, we need to focus on growth, not just how we tax and spend.

We won’t apologise for managing the economy in a way that increases prosperity and living standards.

Our entire focus is on making Britain more globally competitive – not losing out to our competitors abroad.

The Prime Minister promised that this would be a tax-cutting government.

Today, we have cut stamp duty.

We have allowed businesses to keep more of their own money to invest, to innovate, and to grow.

We have cut income tax and national insurance for millions of workers.

And we are securing our place in a fiercely competitive global economy…

…with lower rates of corporation tax…

…and lower rates of personal tax.

We promised to prioritise growth.

We promised a new approach for a new era.

We promised, Mr Speaker, to release the enormous potential of this country.

Our Growth Plan has delivered all those promises and more.

And I commend it to the House. Workers are being supported – what happens to those on fixed incomes, we will find out? Let’s see the details on the incentives to return to work, and the actual figures including the cost to society as those broken by the system continue to increase.

I know this week has been really, really long. But this was important. So important there’s no real room or any of your time left to focus on the weak pound, and the pluses and minuses of this (there are pluses). I will fit this in next week – until then; keep calm and carry on…….at lower tax rates.