Kwasi Kwarteng, the new Chancellor of the Exchequer, has unveiled a mini-budget in a speech made in the House of Commons on Friday 23rd September 2022. On the backdrop of the UK economy seeing rising inflation, the worst energy crisis in generations and limited growth, a package of measures has been announced that are aimed to help enable the UK become one of the most competitive economies in the world, reverting a currently vicious cycle of stagnation to a virtuous cycle of growth.

The main points to note from the Chancellor’s mini-budget speech are summarised below:

  • With reports that the UK may already be in recession, the Chancellor outlined the government’s economic growth target of 2.5% through supply-side reforms and tax incentives with the aim of boosting incentives to invest.
  • A series of 40 investment zones will be set up in England in areas including the West Midlands, Tees Valley and Somerset, where planning rules will be relaxed and business taxes will be reduced to encourage investment the aim is to drive growth and unlock housing. It is understood discussions are taking place with 38 local authorities. The government also intend to work with the devolved administrations.
  • Major infrastructure projects, such as energy, transport and telecommunications projects, were noted as being a particular point of focus for the government with the promise of the publication of a New Bill to unpick the complex patchwork of planning restrictions and EU derived laws related to major infrastructure projects, including streamlining the requirements for assessments, appraisals and consultation activity. A list of priority major infrastructure projects has been released alongside the mini-budget statement (Annex B of the Growth Plan 2022). Ultimately the focus of reforms is on acceleration of infrastructure decision-making and development.
  • The government will unlock the potential of onshore wind by bringing consenting in line with other infrastructure.
  • The Chancellor indicated that housing supply is to be boosted “building more homes in the places people want to live and work and getting our housing market moving” and forthcoming planning reforms to be enabled through increasing the disposal of surplus government land to facilitate building of new homes.
  • In an attempt to increase incentives for workers and businesses a series of tax cuts were announced, including scrapping of the previous 1.25% increase in national insurance from 6th November, the cancellation of the planned rise in corporation tax from 19% to 25%, and the basic rate of income tax will be cut to 19p, one year earlier than planned, alongside a single higher rate of income tax at 40% from April 2023.
  • The cap on bankers’ bonuses, which limited a bonus to twice the salary level, is being scrapped to incentivise global banks to create jobs, invest and pay taxes in London.
  • Changes to stamp duty effective today with the level at which house-buyers starting to pay stamp duty being doubled from £125,000 to £250,000 and first-time buyers will pay no stamp duty on homes worth up to £450,000.
  • In an effort to make energy bills more affordable for households and businesses, the Chancellor announced an energy package costing £60 billion in the six months from October 2022 to lower the cost of living pressures.
  • Pension fund assets are to be unlocked to accelerate and facilitate investment.

The Chancellor noted the government’s success and pride in having achieved the lowest unemployment rate in nearly 50 years but acknowledged that there are currently more vacancies than there are people unemployed and seeking work, and therefore incentives are being proposed to encourage more people to join the labour market, including support for those people who are over 50 and unemployed, and changes to eligibility for Universal Credit.

Sarah Hamilton-Foyn, Executive Director, said: “In terms of the Growth Plan 2022 Investment Zones the government has written to every local authority; so far 38 have responded. What is not yet clear is the detail on the liberalised planning offer for the Investment Zones, what sort of measures will be in place to facilitate growth and how this will enable land for housing and commercial development to come forward sooner than through the current system. We look forward to seeing the government’s full proposal for accelerating housing delivery and “building more homes in the places people want to live and work.”

Laura Day, Principal Economics Analyst, said: “Following a period of economic growth tracking the UK economy and society’s release from the lengthy and deep restrictions of Covid-19 Pandemic, we now find ourselves in a state of extreme economic fragility. Based on the Bank of England publication 24 hours prior to today’s mini-budget, the UK economy is forecasted to have shrunk by 0.1% in Q3 2022, despite originally forecasting growth, indicating the possibility of a recession having already begun.

“If financial forecasters are correct, this recession is to be mild in comparison to the 2007-2009 recession. Nevertheless, it is at this exact time that great focus needs to be made in respect of strategic decision-making and investment in attempts to avoid or otherwise ward off and ride out effects of a potential recession.

“Given the growth seen since August 2021 when pandemic restrictions lifted, not least characterised by the lowest unemployment rate seen in nearly 50 years, the UK economy is in as strong position as we could hope to be given recent and current political, social and economic backdrop. However, measures noted in today’s mini-budget to facilitate and accelerate investment and decision-making in development projects, including housing and energy projects, are welcomed.

“At a time when there is much ongoing uncertainty as we head into the winter period and entering 2023, the financial incentives proposed are hoped to give a degree of comfort to enable strategic level investment to be made. Furthermore, any measures to unlock and ease the planning system and support development from within is also welcomed.

“Ultimately, the mini-budget sets the scene for economic incentives and institutional system changes that are hoped to provide a platform for ongoing investment and continued growth during this next 6 to 12 months.”

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