The Chancellor has announced the newly-formed Government’s initial borrowing and spending plans in his first fiscal statement.
The Chancellor of the Exchequer, Kwasi Kwarteng, has delivered his Mini Budget statement to Parliament, outlining the Government’s new Growth Plan, designed to boost the UK’s stalling economy. The statement comes in the midst of a cost of living crisis and follows a warning from the Bank of England that the country may already be in recession.
Over the ‘medium term’ the Growth Plan aims to achieve a trend rate of growth of 2.5%, by expanding the supply side of the economy through tax incentives and reform.
Comprising a range of interventions intended to achieve prosperity through growth, the Plan includes the following measures for UK businesses:
Energy
The Chancellor said the Government’s Energy Bill Relief scheme will reduce wholesale energy costs for businesses, charities and public sector bodies across the UK, providing a price guarantee equivalent to that offered to households.
Addressing the volatility of energy prices and the associated risks to energy firms that are otherwise viable businesses, the Chancellor announced a new Energy Markets Financing Scheme. Delivered with the Bank of England, this scheme will provide a 100% guarantee for commercial banks to offer emergency liquidity to energy traders.
Tax
Major tax reforms have been outlined to allow businesses to retain more of their profits. The aim is to encourage investment, boost productivity and create new jobs. New measures include cancelling the planned rise in corporation tax, keeping it at 19%, and reversing the 1.25% rise in National Insurance contributions. The Government says this intervention will save 920,000 businesses an average of £10,000 in 2023.
The Chancellor also announced more relief for businesses by making the Annual Investment Allowance £1 million permanently, rather than letting it return to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.
Business Investment
The Enterprise Investment Schemes and the Venture Capital Trusts will be extended beyond 2025. The funding limits associated with the Enterprise Investment Schemes will be increased to make them more generous, coupled with reforms to Company Share Option Plans.
To further support businesses, the Chancellor announced new measures to unlock private investment. The Government intends to change regulations to increase investment by pension funds into UK assets. This is expected to boost economic growth, and incentivise investment into science and technology companies.
Investment Zones
Approximately 40 new Investment Zones are to be created in England, with the aim of boosting local economies. These zones will be allowed relaxed planning rules and reduced business taxes to encourage investment in plant and machinery. The Government is in early discussions with places including Tees Valley, the West Midlands, Norfolk and the West of England. The Chancellor said the Government will work with the devolved administrations to ensure they will also benefit.
Innovation
The Government will provide up to £500 million to support new innovative funds, with the aim of attracting billions of pounds of additional funding in UK science and technology scale-ups.
Concluding his speech, the Chancellor remarked that the measures outlined in the Government’s Growth Plan "have allowed businesses to keep more of their own money to invest, to innovate, and to grow."
Kwasi Kwarteng said:
"We want businesses to invest in the UK, we want the brightest and the best to work here and we want better living standards for everyone."
Following this Mini Budget Statement, a full Budget is expected to occur later in the year.