With the events of the past fortnight, I couldn’t dedicate this column to any other issue than the Chancellor of the Exchequer’s recent mini budget.
First, I would say that the Chancellor has correctly diagnosed that if we all want better paying jobs and frontline services, we need to learn the lessons that other countries like Germany and Japan accepted long ago.
Rather than just focusing on redistributing, seek to increase the amount you need to redistribute, which will benefit society as a whole. Simply put, the bigger the cake, the bigger the slice for everyone.
I would also push back against the narrative that the fiscal state only supports the wealthy. Besides the emphasis on growing the economy so that we could all benefit from increased revenue from the public purse, there were policies explicitly aimed at those who would be most affected by rising costs.
From the start of the month, home energy prices will be capped to ensure that the average household’s energy consumption will cost £2,500 a year until 2024.
This saves the average household a minimum of £1,000 a year based on OFCOM’s previous planned energy cap increases.
This winter, this is coupled with the cost of living payments announced earlier this year. Each household will receive a minimum of £400, those at the lowest will receive an additional £650 and those already receiving the winter fuel payment will receive an additional £300.
A major concern for me was energy tariffs for businesses as they had no existing cap and were already paying higher tariffs than domestic households.
This was a particular concern given that many businesses are still recovering from the impact of the pandemic. I therefore welcome the introduction of an energy price cap for businesses, which will allow businesses to establish their budgets for the coming months.
Another barrier to growth is bureaucracy. I therefore fully support the reclassification of a small business from less than 250 employees to less than 500 employees.
This will reduce costs for an additional 40,000 businesses and exempt them from heavy regulation that is irrelevant for small businesses.
To put this change into context, companies with 50 to 249 employees currently spend an average of 22 working days per month on regulations. By freeing up these working hours, businesses will have the workforce they need to drive growth.
On individual support. From next month, employees will see their National Insurance rates reset to March 2022 levels, meaning they will have more money in their salary. The government has also brought forward the reduction in the basic tax rate from 2024 to 2023.
Despite media reports, I want to emphasize that there is nothing drastic about the changes to corporation tax, national insurance or income tax. Either they come up with pre-announced policies or they simply restore tax levels to where they were a few months ago.
However, this does not mean that what has been announced is perfect. The decision to advance the statement but not accompany it with an OBR forecast was misguided and directly caused market instability. This was completely unnecessary, especially since most of the policies announced were important elements of the Prime Minister’s leadership campaign and therefore had already been priced into the deal. The government must accept that its unexpected and unevaluated policies have triggered uncertainty in the market.
I was happy to see the government acknowledging its mistake and meeting with OBR officials last week before announcing that there will be an assessment of all elements of the ‘Plan for Growth’ rather than policies to medium and long term. I call on the government to publish this assessment and bring forward medium and long-term announcements to the end of the month before the Bank of England meets to discuss interest rates on November 3.
The government is listening though, and I welcome their decision to drop the planned 45p tax rate cut, which I would have voted against had I had the chance.
The policy only benefited 600,000 people and, while it reset tax rates to those of the last Labor government, it had minimal impact on boosting growth. Also, in this case, our priority should be to retain the additional tax revenue in the short term to enable us to fund additional support for those who need it most rather than the possibility of minimal growth stimulation in the long run. term.
Ultimately, however, a focus on growth can benefit everyone. A strong economy produces better paying jobs and funds the services we all use. A stronger economy will make a better York.