Kwarteng scraps higher income tax for top earners and pushes for 1p cut for all

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45 p income tax the interest rate paid by Britain’s biggest earners will be cut, the biggest surprise in the Kwasi Kwarteng’s Mini Budget.

The chancellor also brought forward a planned 1p cut in the base rate – from 20 to 19p – which will now take effect next April instead of 2024.

Mr Kwarteng called for the scrapping of the 45p rate for people earning more than £150,000, which had already been cut from 50p. George Osborne a decade ago, “will simplify the tax system and make Britain more competitive”.

However, the move will fuel criticism that the mini-budget rewards the rich at the expense of the least well-off – in what has been called a return to 1980s-style “trickle-down economics”.

The chancellor also confirmed he was lowering the cap on bankers’ bonuses, while reversing the increase national insurance contributions will also benefit the wealthy in the vast majority.

Rachel ReevesLabour’s shadow chancellor, protested that it was “not a plan for growth” but “a plan to reward the already rich”.

The pound fell to a new 37-year low against the dollar as the “growth plan” was revealed, and there was another sharp rise in government borrowing costs in evidence of market jitters.

Mel Stride, the Tory chairman of the Commons finance committee, attacked Mr Kwarteng for not allowing the independent Office for Budget Responsibility to analyze the package.

“There is a huge void at the heart of the forecasts that have been released,” he told the chancellor, pointing to markets “getting twitchy”.

Mr Kwarteng also rejected the planned increase corporate income tax on the profits of big business, arguing that the move can help boost wages and jobs.

Next April, the duty is expected to rise from 19 percent to 25 percent Rishi Sunak admitted the low rate has failed to spur investment – but will now remain at the lowest rate in the G7.

The Treasury’s book showed the massive scale of tax cuts will cost almost £27bn in 2023-24 – rising to £45bn by 2026-27.

The stamp duty threshold has been raised to £250,000 – or £425,000 for first-time buyers – in another move which will disproportionately benefit the wealthy.

Paul Johnson, manager Institute for Fiscal Studiesraised fears of a repeat of the Conservative government’s infamous early 1970s growth rush that “ended in disaster”.

“This is the biggest tax cut event since 1972. Barber’s ‘march to growth’ then ended in disaster. This budget is now known as the worst in modern times. I really hope this one works much better,” he tweeted.

And Torsten Bell, manager Resolution Foundation thinktank, warned of “public finances placed on an unsustainable footing”, saying of Mr Kwarteng: “He is betting on growth that is more in Putin’s hands than ours in the short term.”

In the Commons, Ms Reeves attacked the “outdated ideology that says society as a whole will benefit if we simply reward those who are already rich”, adding: “They have decided to replace uplift with downflow.”

She said: “When the Prime Minister says she wants to break free from the past, what she really means is that she wants to break free from her own record of failure, because where have the last 12 years left us?

“Lower growth, lower investment, lower productivity and today we learn that we have the lowest consumer confidence on record.”

But Mr Kwarteng insisted: “For too long in this country we have indulged in a redistribution struggle. We must now focus on growth, not just how we tax and spend.

“We’ve cut stamp duty, we’ve allowed businesses to keep more of their own cash for investment, innovation and growth, we’ve cut income tax and national insurance for millions of workers.

“We are securing our place in a highly competitive global economy with lower corporate tax rates and lower personal tax rates.”

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