Chancellor abolishes top rate of income tax for those earning £150,000 and lifts cap on bankers’ bonuses
Kwasi Kwarteng has abolished top rate of income tax for those earning £150,000 and lifted the cap on bankers’ bonuses in his first move as Chancellor.
A planned rise to corporation tax has also been axed and it will remain at 19%, the Chancellor has told the Commons.
Scrapping the top rate of income tax will mean that people on the highest incomes will pay the same rate as those on £50,000.
He added the Government was in early discussions with regions across England to establish the new zones, as well as the devolved administrations in Wales, Scotland and Northern Ireland.
By terming it a “fiscal event” rather than a full budget, Mr Kwarteng avoided the immediate scrutiny and forecasts of the Office for Budget Responsibility.
The package enacting Liz Truss’s tax-cutting promises including reversing the national insurance rise and axing the hike to corporation tax came a day after the Bank of England warned the UK may already be in a recession.
The Government also said it will legislate to require trade unions to put pay offers to a member vote so strikes can only be called once negotiations have fully broken down, the Chancellor said.
The pound dropped to a fresh 37-year-low against the dollar as the Chancellor unveiled his “growth plan” for the UK economy.
Sterling declined by 0.89% to 1.115 US dollars, meaning it has shed 17% against the US currency so far this year.
It comes after Bank of England launched another 0.5 percentage point interest rate hike to 2.25% on Thursday and warned the UK could already be in a recession.
Consumer money expert Martin Lewis described the Government’s financial plan as “staggering” after the so-called mini-budget from Chancellor Kwasi Kwarteng was announced.
Lewis, founder of Money Saving Expert, tweeted: “That really was quite a staggering statement from a Conservative Party government.
“Huge new borrowing at the same time as cutting taxes.
“It’s all aimed at growing the economy. I really hope it works. I really worry what happens if it doesn’t.”
The Chancellor’s mini-budget amounts to an “admission of 12 years of economic failure”, shadow chancellor Rachel Reeves has said.
Shadow chancellor Rachel Reeves said: “The Chancellor has made clear who his priorities are today – not a plan for growth, a plan to reward the already wealthy. A return to the trickle-down of the past, back to the future, not a brave new era.”
Ms Reeves earlier said the evidence shows low rates of corporation tax are “not the best way to boost investment and productivity”, adding Labour would use targeted investment allowances and scrap “outdated and unfair business rates that harm our high streets and small businesses”.
Ms Reeves said it would be replaced with a “system fit for the 21st century”.
On home ownership, Ms Reeves said: “These stamp duty changes have been tried before. Last time the Government did it a third of the people who benefited were buying a second home, a third home or a buy-to-let property. Is that really the best use of taxpayers’ money when borrowing and debt are already so high?”
Ms Reeves criticised the Government for not having independent forecasts from the OBR in connection with the statement, adding: “Never has a Government borrowed so much and explained so little.
“Economic institutions matter yet this Government has undermined the Bank of England, sacked the respected permanent secretary at the Treasury and silenced the Office for Budget Responsibility. This is no way to build confidence, this is no way to build economic growth.”
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