Kwasi's low-tax revolution... but will it work? Chancellor slashes £45bn off burden in biggest cuts since 1972 putting hundreds of pounds in pockets of Brits - and £10k for the richest - but sceptical markets sell off Pound and drive up debt costs
• Chancellor Kwasi Kwarteng has unveiled a huge 'Emergency Budget' with a swathe of tax cuts and reforms
• The 45p top rate of tax is being abolished and the 1p cut to the basic rate is brought forward to next April
• Stamp duty is being scrapped for properties worth under £250,000 and £425,000 for first-time buyers
By JAMES TAPSFIELD POLITICAL EDITOR FOR MAILONLINE
PUBLISHED: 14:26, 23 September 2022 | UPDATED: 14:49, 23 September 2022
Kwasi Kwarteng rolled the dice on the country's future today by unveiling an extraordinary £45billion of tax cuts in a bid to end the UK's 'cycle of stagnation'.
In a dramatic 'Emergency Budget' that saw the biggest assault on the tax burden since 1972, the Chancellor abolished the 45p top rate for around 660,000 people earning over £150,000 - saving them an average of £10,000 a year each.
Millions of ordinary Britons will also keep hundred of pounds more after a 1p cut in the basic rate was brought forward to next April.
Mr Kwarteng reversed the national insurance hike, as well as scrapping a huge planned increase in corporation tax from 19p to 25p and limits on City bonuses.
Stamp duty is being ditched for values up to £250,000, with first time buyers exempt up to £425,000 - taking 200,000 people out of the system altogether.
Beer, wine and cider duty rises are being cancelled - and in an effort to bolster tourism overseas visitors will be able to shop VAT-free.
At a glance: What did the Chancellor announce?
Abolished the 45p tax rate, paid by those earning more than £150,000, from April next year
Cost per year: £2billion
1p cut to basic rate of income tax brought forward by a year to April 2023
Cost per year: £5billion
No stamp duty to be paid on property purchases up to £250,000 and up to £425,000 for first-time buyers
Cost per year: £1.5billion
Reintroduction of VAT-free shopping for overseas tourists
Cost per year: £2billion
Alcohol duty frozen from next year, estimated to be worth 7p on a pint of beer and 38p on a bottle of wine
Hike in National Insurance contributions to be cancelled from 6th November
Cost per year: £15billion
Cancellation of next year's planned rise in Corporation Tax so the levy will remain at 19 per cent
Cost per year: £18billion
Businesses based in 38 new 'investment zones' will have taxes slashed and will benefit from scrapping of planning rules
Cost per year: Not specified
Scrapping of the bankers' bonus cap in a bid to boost the City
Cost per year: Nil
Total cost per year with other measures: £45billion
Dozens of low-tax and low-regulation 'Investment Zones' will be created across the country, with new startups enjoying breaks such as exemption from business rates.
Mr Kwarteng stressed there was a long-term challenge in Britain that needed to be tackled.
'Growth is not as high as it should be,' he said. 'We are determined to break that cycle. We need a new approach for a new era.'
The barrage was not technically a Budget, but a 'fiscal event' - meaning that controversially it was not accompanied by any of the usual independent costings from the OBR.
Economists have voiced alarm at the massive borrowing that will be required to cover the hole in the government's books. The Treasury has announced it will raise an extra £72.4billion of financing over the coming months.
The two year freeze on energy bills for households and businesses announced earlier this month is expected to cost £60billion over the next six months.
The dangers of ramping up the UK's £2.4trillion debt mountain as the Ukraine crisis sends inflation soaring have been underlined by the continuing slide in the Pound against the US dollar, reaching a fresh 37-year low of barely 1.11 this morning.
It dropped further after the statement, hovering perilously near 1.10.
Markets have also pushed up the government's borrowing rates significantly.
Even before today August and September had seen the 10-year yield on government gilts record the biggest increase since October and November 1979.
However, Ms Truss and Mr Kwarteng argue that ramping up economic activity can make up the difference, pointing to decades of lacklustre productivity improvements.
Consumer money expert Martin Lewis described the Government's financial plan as 'staggering' after the so-called mini-budget from Chancellor Kwasi Kwarteng was announced.
Lewis, founder of Money Saving Expert, tweeted: 'That really was quite a staggering statement from a Conservative Party government.
'Huge new borrowing at the same time as cutting taxes.
'It's all aimed at growing the economy. I really hope it works. I really worry what happens if it doesn't.'
The respected IFS think-tank had suggested it could be the biggest tax move since Nigel Lawson's 1988 Budget, when Ms Truss's heroine Margaret Thatcher was PM.
But director Paul Johnson said afterwards that in fact it was the largest since 1972 - when Ted Heath was trying to create an election boom - and 'quite extraordinary'.
'It was like having an entirely new Government,' he said.
'This was the biggest tax-cutting event since 1972, it is not very mini. It is half a century since we have seen tax cuts announced on this scale.'
The Bank of England pushed up interest rates by 0.5 percentage points to 2.5 per cent yesterday, the highest level since 2008. But it surprised many by stopping short of a bigger increase, suggesting that UK plc is already in recession.
Among other developments on the latest whirlwind day in British politics:
• Some of the benefits of income tax cuts will be eroded as the thresholds are remaining frozen, while inflation soars;
• Labour likened Ms Truss and Mr Kwarteng to 'two desperate gamblers in a casino chasing a losing run';
• Cancelling the planned alcohol duty hike on beer, cider, wine and spirits will cost £600 million;
• Mr Kwarteng announced legislation to force trade unions to put pay offers to a member vote so strikes can only be called once negotiations have fully broken down;
• There was confirmation of plans to make about 120,000 more people on Universal Credit take active steps to seek more and better-paid work or face having their benefits reduced.