Chancellor Kwasi Kwarteng will be setting out the Government's plans to tackle the cost of living crisis. Find out when is the mini budget and how it might affect you...
As we head into the colder months, the cost of living crisis is beginning to bite, with many searching for ways to cut household bills and trying to work out which is the cheapest supermarket.
Now that new PM Liz Truss is in charge, many are hoping positive change is on the horizon, following her energy bill freeze announcement shortly after taking office. And this week Chancellor Kwasi Kwarteng will be setting out further plans to tackle the rising cost of living in an emergency announcement. Find out here when is the mini budget and what it could entail.
When is the mini budget?
The mini budget will be announced on Friday, September 23. Chancellor of the Exchequer Kwasi Kwarteng will be delivering the fiscal statement in the House of Commons, at some time in the morning.
The budget is normally only announced by the Chancellor once a year - the last one was delivered by Rishi Sunak at the end of October 2021 - but this 'mini' budget has been announced to help tackle the cost of living crisis. The budget sets out how the government plan to spend their money, and Friday's announcement is likely to focus on tax cuts.
On Friday 23rd September, subject to the agreement of the House of Commons, Chancellor @KwasiKwarteng will unveil the Growth Plan to Parliament. pic.twitter.com/LDj1jkS9RqSeptember 20, 2022
Mini budget predictions
Stamp duty
According to The Times, Whitehall sources have said that government officials have been working on stamp duty cuts for months. It comes a year after the stamp duty holiday that was imposed during the pandemic, which many have blamed for increased property prices.
There are conflicting arguments over the effects of cutting stamp duty, with some saying the tax restricts markets and that a cut will allow more people to move house and give a boost to first time buyers, while critics say the move will actually punish first time buyers and make the housing crisis "even worse".
Ex Lib Dem leader Tim Farron tweeted about the rumoured cut, saying: "I hope this isn’t accurate. How to make the housing crisis in Cumbria even worse: give an extra incentive for people to buy homes they don’t need, pushing them even further out of reach for those who do need them…"
Energy bills
Liz Truss has already announced an energy bill freeze, meaning energy costs for a typical home will be frozen at £2,500 a year for the next two years. However, it's possible more help for those struggling to pay their bills will be announced in the mini budget.
The most likely announcement to be made regarding energy bills is the removal of the green levies. Green levies are a tax on energy firms in relation to their eco credentials, and this cost is often passed on to customers via their energy bill.
The government said the removal of green levies will save households around £150 a year, but Paul Johnson, director of the Institute for Fiscal Studies, described the policy as "somewhere between meaningless and pointless," owing to the small amount households will save.
A clear 3 point plan from @trussliz to help households *immediately* combat the rising cost of living:1.Cutting taxes2.Scrapping levies on energy bills3.A plan to grow the economy#LizforLeader #BBCOurNextPMJuly 25, 2022
National Insurance
Previous Chancellor Rishi Sunak increased National Insurance by 1.25 percentage points, and Liz Truss made it clear throughout her campaign to become the next PM that she plans to reverse this.
She previously told the BBC "I’ll always work to make sure that we are helping those who are struggling. That’s why we took the action that we took on energy bills because we didn’t want to see households facing unaffordable bills.
"And that’s why we’re going to take the action on National Insurance, reversing that increase as well. So, yes, we do have to take difficult decisions to get our economy right."
According to The Telegraph, the move to reverse the National Insurance hike will mean that someone earning £50,000 would save £468 a year in tax, while someone earning £180,000 would get an annual tax cut of more than £2,000.
Other tax cuts
Other tax cuts that Kwasi Kwarteng could announce to tackle the cost of living crisis will affect income tax, corporation tax, inheritance tax and VAT.
Under previous Chancellor Rishi Sunak's plans, a 1p cut to income tax was planned to come into effect in 2024. However, Liz Truss' government are reportedly planning on bringing this forward, as well as raising the higher rate threshold for income tax in England to to £80,000 from its current £50,270.
According to The Telegraph, this move combined with the reversed National Insurance rise would meant that anyone earning £60,000 would save £2,539 a year, while someone on £50,000 would save £468 a year, and anyone earning £30,000 would save £218.
There is also expected to be a freeze in the current corporation tax rate to encourage companies to invest more in the UK and therefore stimulate growth, and Liz Truss has also committed to a review of inheritance tax. Inheritance tax brought in £6bn for the Government in the recent tax year, though it is generally seen as a tax on the wealthy.
Growing the economy is the key to beating inflation - but you can’t penalise businesses and expect the economy to grow. @trussliz is right to scrap the planned corporation tax rise to make sure the UK remains a globally competitive business environment.#LizForLeaderJuly 26, 2022
It has also been reported that Liz Truss is considering cutting VAT, which would mean each household would see a drop in their spending.
The PM has defended her tax cutting approach, telling Sky News, "I don't accept this argument that cutting taxes is somehow unfair. What we know is people on higher incomes generally pay more tax so when you reduce taxes there is often a disproportionate benefit because those people are paying more taxes in the first place.
"We should be setting our tax policy on the basis of what is going to help our country become successful. What is going to deliver that economy that benefits everybody in our country."
However, US President Joe Biden has hit out at Truss' approach, with a tweet saying: "I am sick and tired of trickle-down economics. It has never worked. We're building an economy from the bottom up and middle out."
The criticism came just a day before the two leaders were due to meet for a full bilateral meeting with at the United Nations General Assembly.
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