The wealthiest people in Wales will benefit the most from Kwasi Kwarteng's first mini budget as Chancellor with people looking for work being forced to take part in an "intensive work search regime" in order to be eligible for benefits.
Friday's mini-budget signals a major shift in the way of thinking in the new Tory cabinet. There are major tax cuts to the basic rate, highest rate of tax, national insurance and corporation tax. A stamp duty cut will only apply in England.
Follow live updates as the new Chancellor reveals his mini-budget here.
Some of the measures only apply in England because of Wales' devolved powers but that doesn't mean Mr Kwarteng's announcements won't have an impact across the border. The Tories are pushing a low-tax, low-regulation agenda which they hope will pay off in the long run but it will involve massive borrowing that is already having an impact on financial markets where the UK government's cost of borrowing is rising rapidly. The more money the UK government spends on interest on its debt, the less it has to pay for services.
Here are the key points to take away from Friday and the implications for Wales.
Basic rate of income tax cut
The basic rate of income tax will also be cut to 19% in April 2023 – one year earlier than planned – with 31 million people earning between £12,570 and £50,270 pay on average £170 less in tax every year. Higher rate taxpayers will also benefit from the lower rate on their earnings up to £50k, being on average £360 better off in 2023-24 thanks to the cut to the basic rate.
The top rate of tax is also being abolished. Currently, anyone earning more than £145,000 pays a 45% tax rate. That will be scrapped meaning the highest tax rate will be 40% for people earning over £50,271.
Welsh rates of income tax for non-savings, non-dividend income for Welsh taxpayers are set by the Welsh Government on top of reduced UK rates. The income tax rate cuts announced therefore apply to Welsh taxpayers rather than providing additional funding for the Welsh Government. However the tax cut does not apply in Scotland.
Mr Kwarteng said: "We want businesses across Wales to keep more of their own money to invest, innovate, and grow. Our income tax and national insurance cuts will mean hundreds of pounds a year more in the pockets of over a million workers in Wales."
Stamp Duty cut in England but not in Wales
Land Transaction Tax or LTT replaced Stamp Duty Land Tax (SDLT) in Wales in April 2018. It means plans to cut stamp duty in England in order to boost the economy by encouraging the housing market won't apply here in Wales. In England, the threshold for paying stamp duty is rising to £250,000.
The LTT, which only comes into effect on properties costing more than £180,000, will still apply in Wales. The Welsh Government has considered making those planning to buy a holiday home in Wales pay a higher rate of Land Transaction Tax.
Any cut in stamp duty however is likely to be offset by rising interest rates which the Bank of England increase to 2.25% on Thursday.
The Welsh Government hasn't yet said what it intends to do with LTT A spokesman said: "We have had no prior engagement from the UK Government on any of the changes in today’s statement. We will be looking at the detail of the UK Government’s announcements and their impact on our budget."
The UK Government said the Welsh Government will receive around £70 million over the three-year 2021 Spending Review period as a result of the change to Stamp Duty Land Tax.
'Intensive work search regime' for benefits claimants
The Chancellor announced measures to shake up the benefit system, which could see more than 100,000 people in part-time work face a benefit cut if they fail to properly look for more work.
Universal Credit Claimants who earn less than the equivalent of 15 hours a week at National Living Wage will be required to meet regularly with their Work Coach and take active steps to increase their earnings or face having their benefits reduced.
This change is expected to bring an additional 120,000 people into the more intensive work search regime. Jobseekers over the age of 50 will also be given extra time with jobcentre work coaches, to help them return to the jobs market
Kwasi Kwarteng described the move as: “A win-win. It boosts incomes for families and helps businesses get the domestic workers they need, all while supporting economic growth."
National Insurance rise reversed
The Chancellor confirmed the national insurance increase which came into effect in April will be reversed from November 6. The 1.25 percentage point increase in national insurance was announced by former chancellor Rishi Sunak to help fund health and social care.
Mr Kwarteng added that the plan to reverse the rise in national insurance was a “tax cut for workers”. It means two million people in Wales will seen an extra £235 in their annual pay packet.
It was something Liz Truss promised in her Tory party leadership campaign and the UK Government has said it will still spend the amount it was planning to spend on the health service.
That should mean extra funding for Wales due to be triggered by the planned increase should also be protected but that hasn’t yet been confirmed.
Corporation tax rise cancelled
Businesses in Wales will benefit from a freeze in corporation tax at 19%. Previous chancellor Rishi Sunak had planned to lift it next year.
Under the previous government’s plans, the rate of Corporation Tax was to increase from 19% to 25% from April 2023 for firms making more than £250,000 profit, around 10% of actively trading companies.
Investment Zones
Mr Kwarteng will announce plans to slash personal taxes in addition to business levies in 38 new “investment zones” across the UK. The proposed “investment zones”, dubbed “full fat freeports”, were a staple of Ms Truss’s campaign for the Tory leadership. Under her plan, Ms Truss said these areas would benefit from a low-tax burden, reduced planning restrictions and regulations tailored on a case-by-case basis.
Mr Kwarteng is also expected to announce new legislation to speed up the delivery of around 100 major infrastructure projects across the UK.
In Wales, many of these elements are the responsibility of the Welsh Government - things like planning and environmental rules. With two radically different governments pitched against each other, there are questions over whether they will be able to reach an agreement on how this might work here in Wales.
Bankers' bonuses
The Chancellor has already come under fire for plans to get rid of limits on bankers' bonuses in order to stimulate economic growth. The cap currently limits annual payouts to twice the salary a banker earns.
Mr Kwarteng confirmed in his statement that there would no longer be a cap on bankers bonuses.
The view from Wales
Before the mini budget state Welsh Government spokesperson said we are living in "some of the most challenging economic times we have ever known" with "inflation eroding household and public service budgets and the cost of living crisis impacting every individual, community and business across the country."
The statement continued: “This new UK Government needs to show they genuinely understand the real challenges faced by people, businesses and our public services – and to demonstrate that through bold action in their Fiscal Statement.
“We want to see action taken to target support to people who need help the most, to support public services with inflation driven budgetary pressures, and to invest in a low carbon future to tackle rising energy bills over the long-term.
“We have already made these priorities crystal clear to the Chancellor, and this statement is an opportunity for the UK Government to show it does not have the same misplaced priorities as the old one.”
Ahead of Friday's mini-budget, Plaid Cymru's Treasury spokesperson Ben Lake MP criticised both the new PM and Chancellor saying they "seem intent on making the super-rich even richer while everyone else sees the value of their wages decrease and costs rocket."
He added: "The Chancellor needs to reconsider his approach, and stop peddling fantasy ideas that have been completely discredited by the rest of the world. Even President Biden recently stated that he is ‘sick and tired of trickle-down economics – it has never worked.’ There is no evidence that these tax cuts will bring economic growth. What is certain is that future generations will be paying off this Tory debt for decades to come.
“What we should be seeing tomorrow is a much clearer commitment to protecting households and businesses from the current crisis. This calls for expanding the cost-of-living payments and payments for those reliant on heating oil and guaranteeing that they will be extended next year. Furthermore, the Government should establish urgently a hardship fund for small businesses for whom the current support will be insufficient.
“It should also be recognised that decades of Westminster Governments have underinvested in Wales. It is time to give Wales the fiscal powers we need to unlock our economic potential, starting with investment in our physical infrastructure and digital connectivity, a street-by-street home insulation programme and a renewables revolution.”
Welsh Liberal Democrat leader Jane Dodds was also critical of new Tory measures including the business energy cap announced this week which she called a "temporary sticking plaster". It comes "too late for the many small businesses that already closed their doors for the last time because they couldn’t afford soaring bills," Ms Dodds said.
And she said that the measures expected in the Chancellor's announcement are likely to increase future problems by adding to the UK's national debt rather than being funded by a "windfall tax on the obscene profits of global oil and gas giants."
She added: “What I want to see and what I believe the Welsh people want to see is not massive tax cuts for the big banks and global corporations like Amazon, who are not struggling and instead real help targeted at families and small businesses paid for by taxing the super profits of energy companies, who right now are making their money off people’s misery.
“I also think it is quite telling that they have blocked OBR (Office for Budget Responsibility) scrutiny of their plans. If you cannot be transparent about your plans for the economy, you shouldn’t be trusted to run it.”
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