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The UK chancellor on Friday announced a ‘permanent’ cut to stamp duty and a reversal of tax hikes as part of plans to usher in a growth-focused ‘new era’ for the country.
Planning reforms to boost infrastructure progress were among the other measures announced by Kwasi Kwarteng, who also put a figure on how much energy bill protection measures are expected to cost.
In a what was called a 'fiscal event', Kwarteng said the government's focus will be on lowering tax and responsible management of public finances.
He confirmed that a 1.25 percentage point national insurance hike, announced by the previous Conservative government, has been cancelled. A hike in corporation tax, which would have taken the levy to 25% next year, has also been reversed. It will remain at 19%.
A cap on bankers' bonuses also will be scrapped, he confirmed.
Turning to energy bills, Kwarteng said a typical household bill be capped at £2,500 over the next two years. Firms will get energy bill help as part of measures funded through government borrowing, rather than through a so-called ‘windfall tax’.
Kwarteng said the total cost of the energy bills scheme will be £60 billion for the six months from October. The estimate is based on recent energy prices, he said.
Also among landmark measures, the threshold for stamp duty on home purchases will be lifted to £250,000 from £125,000. For first-time buyers, it is lifted to £425,000 from £300,000.
Kwarteng also announced plans to introduce about 40 'investment zones' in the UK. Businesses will receive tax incentives and planning rules will be relaxed.
The chancellor's measures are part of the UK government's aim to reach a ‘trend’ annual economic growth rate of 2.5%.
They come in the wake of the Bank of England lifting the key bank rate by 50 basis points to 2.25%.
The BoE also suggested the UK may already be in recession. The BoE said the UK economy will shrink 0.1% in the third quarter, following a decline at the same pace in the second. Two consecutive quarters of falling gross domestic product meets a basic definition of a recession.
The pound was slightly higher after the mini-budget announcement, but remained below the $1.12 mark. Sterling traded at $1.1188 after the measures were announced, versus $1.1166 shortly beforehand.
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