Chancellor Kwasi Kwarteng has cut the top rate of income tax for those earning £150,000 or more from 45 per cent to 40 per cent, and the basic rate of income tax from 20 per cent to 19 per cent.
The tax cuts, which will come in from April 2023, will cost the Treasury around £37bn in 2023-24, official figures reveal.
Kwarteng also lifted the cap on bankers’ bonuses, reversed the National Insurance increase, and cancelled the rise to Corporation Tax.
The Institute for Fiscal Studies (IFS) said the net effect on someone earning £1m would be a £40,000-a-year gain.
Speaking to the BBC after the chancellor’s speech in the House of Commons, Paul Johnson, director of the IFS, said, ‘It’s like having an entirely new Government.’
‘[The] biggest tax-cutting event since 1972. It’s half a century since we’ve seen tax cuts announced on this scale.’
He said the Government’s debt would rise year-on-year and that he was worried about inflation.
Courteney Donaldson, managing director, childcare and education at Christie & Co, said, ‘Whilst the government’s announcements over the past few days, including the mini-budget and the Energy Bill Relief Scheme allude to cost benefits for business in the childcare and education sectors, the announcements have been met with disappointment.
'There is no doubt that the regulations to halt the increasing rate of energy bills is a relief to many, as well as the reversal of the national insurance rate, however the lack of action in reviewing business rates in England or VAT contributions is a missed opportunity.
Responding to the chancellor's reference to childcare reforms in his speech, she added, ‘Comments in the chancellor’s budget statement today regarding cutting the cost of childcare will be of great worry to owners of childcare settings.
‘Whilst the plans surrounding this are yet to be announced, following so closely off the back of the IEA paper in July ‘Cutting Through: How to address the cost of living crisis’, suggests a larger scale reform could be in action. Topics for debate in that paper included the removal or reduction in ratios, the deregulation of childcare providers to allow other parents or family member to provide childcare for pay and even reducing or removing regulatory requirements such as EYFS. We would hope that the chancellor works closely with the sector before bringing into law actions which will impact both the sector and the children in its’ care.’
Paul Whiteman general secretary of school leaders' union NAHT, said, ‘The Government's "mini-budget" is incredibly disappointing. It is a squandered opportunity to address the chronic underfunding in education and wider public services. It will seem bemusing to many people in this country who see public services stretched to breaking point. To them, today's announcement will seem very distant from reality.'
On the announcement that the government will legislate new rules for trade unions, he added, ‘The proposed legislation to further restrict workers rights is needless and unnecessary. Trade Unions are already subject to stringent laws. Government should be focused on resolving the issues that cause dissatisfaction amongst workers rather than removing their ability to object.’
Alison Garnham, chief executive of the Child Poverty Action Group (CPAG), said, ‘Despite his rhetoric about supporting families, this was in reality a statement for the 1 per cent, saying more about bankers’ bonuses than helping hungry kids.
‘Today was a vital opportunity to provide reassurance and support to those who need it the most – but instead the government risks a collision with reality, and the 4 million kids currently living in poverty in the UK will be forced to pay the price.
‘In the short term benefits must rise with inflation as soon as possible, the benefit cap must be scrapped, and deductions paused to help families get through winter. And sooner rather than later government must grapple with the fact that our social security system is there for a reason – and investing in it is the best way to keep kids and their parents out of poverty.
On the decision to increase work-search requirements for universal credit claimants working up to 15 hours per week, she said, ‘The Government could and should be making a big difference for low-earners who want to work more. But sanctions make people poor, not help them get jobs. Investing in skills training and more affordable childcare would make the difference they need.’
Mark Russell, chief executive at The Children’s Society, said, ‘Changes to the tax system right now are barking up the wrong tree. Spending billions in handouts to benefit those on the highest incomes but failing miserably to meet the needs of families on the lowest incomes who will still be struggling to heat their homes this winter. We need to see far more direct support for families bearing the brunt of the cost-of-living crisis.’
‘What is glaringly absent from today’s announcement is any targeted support for the hardest hit families. In the week we released our Good Childhood Report revealing the damaging decline in children's well-being this is a shocking omission - and we are now calling on the Government to take swift follow up action for these children facing a cold hungry Christmas.’