If you’re feeling a bit dizzy from all the U-turns in economic policy under Truss’ leadership recently, we can’t blame you! It’s difficult to keep up with it all at the moment, so we are here to help. Let’s have a look at what’s been going on…
Goodbye Kwarteng, Hello Hunt
Jeremy Hunt has recently replaced Kwasi Kwarteng as Chancellor, bringing with him even more economic changes.
Liz Truss has stated that Government spending will low grow less rapidly than she planned, meaning lots of U-turns on her previous plans.
The Medium-Term Fiscal Plan
On 26th September 2022, Kwarteng revealed that his Medium-Term Fiscal Plan would be presented on 23rd November.
This announcement is still in place, except now it’s happening earlier than planned and being delivered by a different man (Hunt). The Treasury announced on 10th October that the Chancellor would bring forward the announcement of this plan to the 31st October as opposed to 23rd November.
Triple Lock Confusion
The triple lock means that the state pension rises each year in line with either inflation, average earnings, or 2.5%, depending on which figure is the highest.
On 17th October, Hunt indicated that the Government was considering shelving the triple lock on pensions. However, two days later during Prime Minister’s Questions, Truss confirmed that the triple lock was there to stay.
“Firstly, we will reverse almost all the tax measures announced in the Growth Plan three weeks ago that have not started Parliamentary legislation” -Jeremy Hunt
Income Tax U-Turns
Hunt has announced that he’s reversing the proposed 1% cut in the basic rate of income tax announced in Kwarteng’s mini-budget. Instead, the basic rate will remain at 20%.
He’s also announced that the Government will not proceed with abolishing the 45% additional rate of income tax, as was previously announced in the mini-budget.
Alcohol Duty Freeze U-Turn
Hunt has also abandoned Kwarteng’s plans of freezing alcohol duty rates for a year, commencing 1st February 2023. This freeze is no longer going ahead, which is estimated to save the Treasury £600 million a year.
Corporation Tax Double U-Turn
Kwarteng announced in his mini-budget that the previously planned rise in corporation tax due to come into force in April 2023 would no longer go ahead.
Since his replacement, Truss has stated that the rise will go ahead next year after all, rising from 19% to 25%.
Energy Bill Price Cap
During Prime Minister’s questions on 19th October, Truss seemed to lean heavily on her energy bill price cap as a supportive measure for those most vulnerable. However, this energy bill support to ensure that the typical household’s average bill doesn’t exceed £2,500 is only to last until April 2023. The support is only actually in place for half a year.
Stamp Duty Land Tax
One remaining element of Kwarteng’s mini-budget is the changes to Stamp Duty Land Tax. The nil-rate tax threshold will stay at the increased £250,000, and £425,000 for First-Time Buyers.