Mini budget: when is it and what can go in it?

By Ben King
Business Reporter, BBC News

commuterimage source, Getty Images

Tax cuts and measures to boost the economy will be unveiled in a mini-budget Friday.

It comes as the UK faces a cost of living crisis and the prospect of a recession.

What could be in the mini budget?

  • let people keep more of their income by cutting National Insurance (NI)
  • scrapping a planned increase in the amount tax companies pay on their profits
  • possible reductions in other taxes, including stamp duty paid on home purchases
  • ending the limit on banker bonuses
  • tightening of the rules on universal credit
  • plans to boost economic growth, such as creating low-tax zones around the UK

The announcements are made by the new Chancellor Kwasi Kwarteng, who is responsible for public finances.

The tax cut plans under consideration could cost at least £30 billion.

What changes are expected in the national insurance schemes?

NI would revert to the old rate from April 2023 – to be replaced by a new health and social care levy with a rate of 1.25%. The levy is now not introduced.

The NHS is still getting the promised funding, but the government is now expected to borrow the money rather than take it off taxes.

High earners will benefit the most as they pay the most NI. An NI discount doesn’t help retirees or those on low incomes or benefits because they don’t pay the tax.

What other announcements are expected?

This tax is based on the annual profit that a company makes.

However, Ms Truss plans to cancel the raise.

These costs are used to finance schemes such as insulation and sustainable energy.

The prime minister has promised to temporarily abolish the levies, saving households around £150 each.

A possible cut in the capital tax on people’s income could also be in the offing.

Mr Kwarteng is expected to announce social reform to “get Britain back to work”.

This includes universal credit, a benefit paid to people of working age.

How does the government intend to stimulate growth?

The mini-budget could also end the cap on bankers’ bonuses. This was implemented across the EU in 2014 (when the UK was still a member) after the global financial crisis. Under current rules, a banker’s bonus cannot exceed annual salary – unless shareholders agree.

When asked if she would like to see bankers get bigger bonuses, Ms. Truss said she wanted to see a growing economy.

The government may also announce the creation of “special investment zones”. Certain locations could be allowed to relax scheduling rules and lower business taxes to encourage investment.

Can the UK afford to tax less and borrow more?

Critics, including Rishi Sunak, rival to Mrs Truss’ conservative leadership, argue that immediate tax cuts will force the government to borrow more.

The money, plus interest, will eventually have to be repaid by the taxpayer.

However, Ms. Truss argues that tax cuts will help the economy grow, bringing in more money to cover the cost of the loan amount.

Why is it called a mini budget?

Major decisions about taxes and spending are normally made twice a year – in a fall budget statement and a spring memorandum.

The Bureau for Budgetary Responsibility (OBR) – which provides independent advice to the government – normally publishes its own analysis of these statements. It describes the cost of new policies, how much tax will be raised and what it means for the economy.

However, the cabinet refuses to publish the assessment of the OBR alongside the mini-budget.

The Treasury said it “stays”[s] committed to maintaining the usual two forecasts in this fiscal year as required”.

A full budget is expected later this year, but no date has been set.

What are your questions about the cost of living crisis? What do you want to know about the chancellor’s mini-budget? Mail your questions to: [email protected].

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