Businesses welcome the 'go for growth' opportunity offered by government mini-budgets

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Businesses welcome the 'go for growth' opportunity offered by government mini-budgets

Prime Minister Kwasi Kwarten leaves 11 Downing Street ahead of government mini-budget

UK Prime Minister Kwasi Kwarten has introduced massive tax cuts in a mini-budget aimed at boosting economic growth. This is widely hailed by the business community as a chance to break out of years of low productivity and low growth.

Speaking to MPs in the House of Commons this morning (September 23), Mr. Kwarteng introduced “a new approach for a new era focused on growth.” The approach includes cuts in income taxes, national insurance and corporate taxes aimed at boosting economic growth to 2.5%, though there is no indication when this will be achieved.

Stamp duties were also cut, and planned increases in tariffs on beer, cider, wine and spirits were scrapped. The cap on bankers’ bonuses has been lifted and the ban on shale gas fracking has been lifted.

Confederation of British Industry Secretary General Tony Dunker welcomed the new strategy, calling it a “turning point for our economy”. He cites the war in Ukraine and the energy crisis as reasons why the UK must prioritize growth. This is also partly due to lower energy bills aimed at protecting both businesses and consumers.

“Today is the first day of the UK’s new growth approach,” he says. “We must now take this opportunity to make it matter and bring growth to every corner of the UK.”

Government tax cut details

In the mini-budget, Kwarteng brought forward plans to cut the base rate of income tax by one pence from 2024 to next year, bringing the rate down to 19%. The Government will abolish the income tax rate of 45 pence on incomes over £150,000 a year. So the maximum tax rate is 40 pence.

The 1.25% increase in national insurance premiums introduced earlier this year will be reversed from 6 November. It also canceled plans to raise the corporate tax from 19% to 25% next year.

Businesses across the UK will enthusiastically welcome the PM’s pledge to focus on economic growth and accelerate new infrastructure development

The Institute for Finance (IFS) estimates that tax cuts will cost £41bn in 2024 and £45bn in 2026, making it “the biggest tax cut event since 1972”. The cut of that round by then-Prime Minister Tony Barber is widely seen as a disaster.

However, businesses are in favor of the plan and expect more from the government. British Chamber of Commerce Secretary General Shevaun Haviland described today’s announcement as a “bold start” and hopes it will serve as a springboard for a long-term economic strategy.

“Businesses across the UK will enthusiastically welcome the Prime Minister’s pledge to focus on economic growth and accelerate new infrastructure development,” she says. “The Chamber Network strongly believes in providing businesses with the tools and support they need to generate wealth to fund government tax revenues.”

Introducing “Investment Zone”

She also welcomes news of a new ‘investment zone’. Businesses will receive significant tax cuts and restrictions on construction in these areas will be eased. The government is currently in talks with 38 local authorities across the UK about the plan.

These include a 10-year “accelerated” tax cut for structures and buildings, and a full tax cut for investments in factories and machinery. Land and buildings purchased in these zones are not subject to stamp duty, the business tax rate does not apply to newly occupied premises, and an employer may We do not pay national insurance premiums.

Haviland said: Lessons from the past must also be learned. It’s important to get these zones right the first time. Otherwise, growth and investment can be shifted from one region to another without creating new economic activity. “

Territories interested in becoming investment zones include Liverpool, Greater Manchester, Sunderland, Southampton, Essex and Somerset.

The government also plans to launch a number of infrastructure projects, including the Hinkley Point C and Sizewell nuclear power plants and the Cambo Phase 1 oil field. The goal is to start as much construction as possible by the start of 2023.

Small businesses have also welcomed the announcement, with Martin Mactag, president of the Small Business Federation, saying the Truss government is “off to a good start.”

“The Prime Minister is taking steps today to support small and medium enterprises and recognizes rightly that eliminating taxes on employment, investment and entrepreneurship is essential for our economy,” he added. rice field.

“Ministers must work relentlessly to remove barriers to the success of SMEs, especially given the current headwinds. We look forward to working with ministers and ministries to take steps to help small businesses grow and succeed.”

Concern about scale of reduction

However, there were also criticisms of the mini-budget. The Office of Budget Responsibility has yet to review the plan and the amount of borrowing needed to pay for the cuts, especially given the Bank of England warned yesterday that the UK economy was likely already in recession. I have concerns about levels.

Inflation is at its highest level in 40 years and is very likely to rise further. Tax cuts could help the inflationary environment.

Borrowing is likely to exceed 3% of GDP in the mid-2020s, despite government targets enacted in January, according to IFS.

The Prime Minister today took steps to support SMEs and recognized that eliminating taxes on employment, investment and entrepreneurs is vital to our economy.

Meanwhile, the value of the pound plummeted to a 37-year low, falling 3% below $1.10. It also fell to €1.13 against the euro, stock markets fell, and the FTSE 100 fell to its lowest level in two months.

The Resolution Foundation has expressed concern about the unequal nature of the cuts and, according to its analysis, is set to make nearly half of the profits go to the wealthiest 5%. The £20,000 person claims to get £5,220 from their budget, while the £20,000 person gets only £157.

Trade unions have also condemned plans to impose new limits on strike action. In a speech to parliamentarians, Mr. Kwarteng said the government would enact a law requiring unions to introduce minimum service levels during strikes and put wages on the votes of union members. He said the government should focus on working towards reconciliation rather than making it harder to take action.

Still, PwC analysts believe the budget proposal will grab the attention of companies around the world, not just those in the UK. Stella Amiss, PwC Regional Tax Leader, said: Attracting attention and in the case of her new high tax rate of 40%, the unexpected nature of the reforms announced today shows that the prime minister wants Britain to take notice. “