Kwasi Kwarteng unleashed a tax cut bonanza in his mini budget in the House of Commons today.
The new Chancellor announced a series of sweeping reforms which he believed would “release the enormous potential of this country.”
This included both scrapping pledged hikes to national insurance rates and the introduction of the health and social care levy, alongside a dramatic ditching of the 45p higher tax rate.
Earners on the basic 20p rate will also benefit from a 1p percentage point cut one year earlier than planned, he announced in the mini budget today.
Kwarteng said: “High tax rates damage Britain’s competitiveness. They reduce the incentive to work, invest, and start a business. And the higher the tax, the more ways people seek to avoid them, or work elsewhere or simply work less, rather than putting their time and money to more creative and productive ends.”
The cuts will take effect from next April, as households grapple with a deepening cost of living crisis and the Government pushes to reignite the economy – targeting growth levels of 2.5 per cent year.
He said: “We won’t apologise for managing the economy in a way that increases prosperity and living standards. Our entire focus is on making Britain more globally competitive – not losing out to our competitors abroad,” he said in his mini budget announcement.
In a bid to boost home ownership, the Government has also ramped up the threshold for stamp duty from the first time buyers from £300,000 to £425,000.
Further measures on projects such as digital infrastructure are set to be announced later this year.
Kwarteng’s ‘mini’ budget is likely to stoke inflation, with the Bank of England already hiking interest rates several times in a row in order to get ahead of price rises.
The Bank is likely to have to hike further and faster if inflation embeds into wages and the wider economy.