I was very wary when I learnt the terms of the so-called mini budget as explained by Kwasi Kwarteng, the Chancellor.
I didn’t like the fact that top rate tax was reduced in particular as it seemed to signal that we Conservatives cared little for those who had much less resources on which to live. Personally that is definitely not my view so I was very glad when a u turn occurred; although I was dismayed that it was proposed in the first place.
However, since we conservatives have come into office in 2010 there has been a constant complaint that we have lacked a vision and clarity of direction. There were many reasons for this perhaps; a coalition government for 5 years, frequent general elections, the struggles over BREXIT, the battle with COVID-19 and now the Ukrainian War. Meanwhile the economy waxed and waned with little real focus on growth and prosperity seemingly possible. Right now, given the situation we are in, the prospect of a deep recession even looms.
So, the Government is trying to do something about that an this I gather was what the mini-budget sought to address. Truly it is trying to stimulate growth through tax cuts and cutting pointless regulations.
Sadly this message does not seem to have been well presented by the Government and that was daft; it should have been. Opposition parties were able to highlight that the measures seemed to support the rich rather than the poor and in tax changes they seemed to be right.
However, let me just analyse what has really happened. Truthfully everyone benefits from the mini-budget now. Nobody pays income tax now if they earn below £12,500 which is £6,000 more than when we assumed office in 2010. This means that most of those low-income workers who saw their tax bill doubled when the last Labour Government scrapped the 10p rate now pay no tax at all. All taxpayers benefit from a one per cent cut in general taxation and the National Insurance rise has been reversed. Which when combined with July's increase in threshold of when people start to pay National Insurance actually means a real terms NI cut for people. I am glad too that even the 7p rise in the price of a pint of beer has disappeared. Thank goodness action is being taken to mitigate rises in energy costs – for everyone too.
The aim of the mini-budget is simple to stoke up our economy which will curb inflation, incentivise jobs, stimulate growth, bring down interest rates Not only all of that, but the whole point of the Budget is to curb inflation, create growth and jobs, and keep a lid on interest rates. Everyone benefits in those circumstances.
Clearly it is a bit of a risk and the markets feel that too. But I think it may work – it is too early to say yet. It is perfectly true that the markets have not yet seen what a great idea it is (although some disagree), and there is no doubt that it’s a bit of a gamble. Personally, I am no expert economist but I do accept that the government had to do something quite dramatic to address the problems we face now. I support the Government on doing that and expect as well as hope it all works out.