What measures did the chancellor announce and what do they mean for the country? reports Shehab Khan Chancellor Kwasi Kwarteng has announced he will cut the top rate of income tax for the country’s wealthiest, as his mini-budget was described as the “biggest tax cut” in half a century. Describing his economic plans as “one of the most significant interventions ever made by the British state”, the chancellor introduced sweeping measures to deliver on Liz Truss’ promises of tax cuts and economic growth by spending tens of billions of pounds. During his so-called mini-budget – which also removed the cap on bankers’ bonuses and added further cuts to the welfare system – Mr Kwarteng claimed his plan would “turn the vicious cycle of stagnation into a virtuous cycle of growth”. . Critics described it as a “budget for the rich”, while experts branded it a “gamble” and raised concerns about the extra £45 billion the government will have to borrow to pay for the cuts. Around an extra £60 billion will also need to be borrowed to pay for the energy bill rescue for households and businesses in the first six months from October. Among the measures, the chancellor announced he was cutting stamp duty, meaning 200,000 fewer people a year would pay tax on house purchases. In a bombshell announcement, Mr Kwarteng announced he would “abolish” the 45% top rate of income tax for the 629,000 in the country who earn more than £150,000 a year. This means that from April, the highest earners will pay just 40% income tax – the same amount paid by those earning more than £50,271 a year. The planned reduction in the basic rate of income tax by 1p will also be brought forward by one year. This will come into effect in April 2023, meaning the tax will drop from 20% to 19%. On average, this is a saving of £14 per month for 31 million people. The key announcements in the chancellor’s mini-budget:

The top income tax rate of 45% for the highest earners in the country is abolished Cut in stamp duty – meaning the exemption level doubled immediately from £125,000 to £250,000 and from £300,000 to £425,000 for first-time buyers Planned 1p reduction in the basic rate of income tax brought forward by one year to 2023 The cap on bankers’ bonuses should be removed Cut in National Insurance from November New low-tax “investment zones” with tax breaks for businesses The planned rise in corporate tax will be scrapped and will remain at 19% Tougher rules for those on Universal Credit – they must take active steps to look for more and better paid work or face a cut in benefits Establishment of VAT-free shopping for foreign visitors Anti-strike legislation forces unions to put pay offers to membership vote The planned alcohol tax increase is scrapped

The package was announced a day after the Bank of England warned that the UK may already be in recession and raised interest rates to 2.25%. Since the announcement, the pound has fallen to a new 37-year low against the dollar. Sterling fell 0.89% to US$1.115, meaning it has lost 17% against the US currency so far this year alone. Mr Kwarteng was under pressure to deliver solutions quickly as he stepped into the role at a time when the UK is facing an escalating cost of living crisis, a recession, soaring inflation and rising interest rates. He told the Commons that his “growth plan” would usher in a “new era” for the country, which would be “built around three priorities: reforming the supply side of the economy, maintaining a responsible approach to public finances and tax reduction. growth stimulation”. But experts cast doubt on the risk-taking plans, with shadow chancellor Rachel Reeves describing Mr Kwarteng and Ms Truss as “two desperate gamblers in a casino chasing a lost run”. “The chancellor has made it clear what his priorities are today, not a growth plan – a plan to reward the already rich,” he added. “A return to the past – back to the future, not a brave new era.” “The Tories can’t solve the cost of living crisis, the Tories are the cost of living crisis. And the country can’t take it anymore,” he added. “Typically, chancellors target their aid to those at the bottom of the income spectrum. Today, much of the help has been for higher earners – listen to Robert Peston’s analysis Labor MP John McDonnell called it “the most socially divisive budget in a generation”. The Resolution Foundation estimated that almost two-thirds of the gains from the personal tax cuts would go to the richest fifth of the country, while just 12% would go to the poorest. Institute for Fiscal Studies (IFS) director Paul Johnson told ITV News the plans were a “big gamble” with both public finances and inflation as he raised concerns. He said the “emergency” budget was the “biggest tax-cutting event since 1972”, referring to that year’s budget by former Tory chancellor Anthony Barber, who served under Edward Heath and made big tax cuts. “Barber’s ‘dash for growth’ then ended in disaster. This budget is now known as the worst in modern times,” he added in a tweet. “Honestly, I hope this works a lot better.” He said the chancellor had made the plans “without even an apparent attempt to make the public finances add up” and “we heard nothing about public spending”. “Early indications are that the markets – which will have to lend the money needed to cover the gap in the government’s fiscal plans – are not impressed. This is worrying,” he added in a statement. “Government borrowing is on the rise. It will reach the third highest peak since the war and will remain well above £100bn even after the withdrawal of the energy support package.’ By calling it a “fiscal event” rather than a full, official budget, Mr Kwarteng avoided direct scrutiny and forecasts from the Office for Budget Responsibility (OBR) – meaning the estimates are based solely on Treasury calculations. There was also some concern in the Tory party, with Treasury Select Committee Chair Mel Stride saying there was a “huge gap” created by the lack of OBR forecasts. Conservative former cabinet minister Julian Smith said the chancellor’s decision to impose a “huge” tax cut on the wealthy was “wrong”. “In a statement with many positive business measures, this huge tax cut for the very wealthy at a time of national crisis and real fear and anxiety among low-income workers and citizens is wrong,” he tweeted. Savings expert Martin Lewis described the announcement as “shocking”, writing on Twitter: “Massive new borrowing at the same time as tax cuts. “It’s all about growing the economy. I really hope it works. I’m really worried what will happen if it doesn’t.” Ahead of his Budget, the chancellor had already announced the reversal of the rise in national insurance, introduced by his predecessor Rishi Sunak in April, to tackle backlogs in health and social care. Abolishing 1.25% of National Insurance would save someone on a salary of £25,000 a year £15.50 a month. In further plans unveiled on Friday, the chancellor said a planned rise in corporation tax has been scrapped and will remain at 19%, along with a planned increase in duty on beer, cider and spirits, and VAT-free shopping will be introduced for visitors from abroad. He also confirmed that the government would create low-tax “investment zones” where planning rules would be relaxed and business taxes would be reduced to encourage investment. Want a quick and special update on the biggest news? Listen to our latest podcasts to find out what you need to know Mr Kwarteng said the Government was in early discussions with regions across England about the creation of the new zones, as well as the devolved authorities in Scotland, Wales and Northern Ireland. He also confirmed the long-awaited and controversial lifting of the cap on bankers’ bonuses. The cap, introduced by European Union law in the wake of the 2008 financial crisis, limits annual payouts to twice a banker’s salary. “We need the global banks to create jobs here, invest here and pay taxes here in London, not in Paris, not in Frankfurt and not in New York,” Mr Kwarteng said. “All the bonus did was increase bankers’ basic salaries or drive business out of Europe. “It was never going to cap total pay, so let’s not sit here and pretend otherwise. So we’ll get rid of it.”