Mini Budget 22 – Geniuses and Lunatics

Dafferns Tax Partner Brian Jukes always has compelling views on tax and the Budget and today’s opinion dividing Mini Budget is certainly no exception…

It is often said that there is a fine line between genius and madness. Never before in my working lifetime have I considered that comparison to be more appropriate to UK fiscal policy

Brian Jukes – Dafferns Tax Partner

Having just sat through the so-called mini-Budget I can summarise my reaction by a mixture of shock and fear – fear for the future of the UK if the Government’s tax gamble doesn’t pay off, shock in that I have never seen such a dramatic change of direction before. 

I know we are living in a globally competitive environment, but the lengths this new Conservative Government are willing to go to in order to make the UK an attractive place to do business appear radical at best, or foolhardy perhaps more accurately.

Year after year I have sat through Chancellors’ Budget speeches listening to an endless discussion of economic statistics and waiting with bated breath for interesting tax announcements that rarely, if ever, transpired. This mini-Budget packed in a plethora of earth-shattering tax announcements in the space of five minutes!

Brian Jukes – Dafferns Tax Partner

The headlines

  • Reversal of the 1.25% increase in national insurance from November 2022
  • Completely scrapping the proposed increase in the rate of corporation tax from April 2023, so remaining at 19%
  • Reductions in the rate of stamp duty land tax across a wide range of different scenarios
  • Removal of the cap on bankers’ bonuses
  • Reducing the basic rate of income tax to 19% from April 2023
  • Abolishing the 45% additional rate of income tax
  • Reversing the off-payroll working rule changes – not only those implemented in 2021, but also the changes made in 2017
  • Making various share incentive schemes more attractive (SEIS, EIS, VCT, CSOP)
  • Various amendments to the capital allowances system, including a permanent fixing of the annual investment allowance at £1m
  • The creation of 40 enterprise zones in the UK, which will be entitled to various further tax breaks and incentives

A complete about turn on UK fiscal policy

Many of these measures represent a complete about turn on UK fiscal policy that has been going in roughly the same direction for the last 25 years. Not only that, but also in many areas flying in the face of public opinion and encouraging a widening of the gap between the haves and the have nots.

With the next general election having to be held in December 2024 at the latest, there is going to have to be some dramatic economic reaction to these tax changes in order to give the Conservatives any hope of re-election. That is a gamble our new Prime Minister obviously considers to be worth taking.

From the perspective of the UK’s collective prosperity, I obviously hope these changes deliver the desired economic growth, but continuing the gambling theme, from a roulette perspective I would liken the odds of success to be more akin to betting on a single number coming up, rather than the more promising odds of 50:50 on black or red (and yes, I know zero is green for all of my fellow pedants out there!).

Time will tell

I hope my somewhat gloomy assessment proves to be wrong, but if it isn’t, we as UK taxpayers are going to be paying for these tax cuts for many years to come. Genius or madness? Only time will tell, but I suspect it won’t take long to find out.