Today’s industry leaders and owners were divided by Kwasi Kwarteng’s announcement of a drastic “mini-budget”, in which Kwasi Kwarteng announced the most comprehensive tax cut package in 50 years.
As Mr Kwarteng announced his plan for growth as a new era in Britain, he also revealed cuts to stamp duty and income tax as well as the scrapping of planned increases in business taxes.
Tory MPs backed the Chancellor’s claim that tax cuts would transform the “foolish cycle of stagnation” into a “virtuous cycle for growth”.
Industry chiefs hailed Mr Kwarteng’s plan as “probably the most business-friendly budget of the century”. However, some critics say that the measures are not sufficient to address the financial crisis faced by businesses after years of uncertainty following the outbreak, war in Ukraine, and the current cost-of living crisis.
MailOnline takes a look at the reaction of businesses to the Mini-budget Announcement by the Chancellor.
Chancellor Kwasi Kwarteng declared his plans ‘for growth’ as a ‘new era’ for Britain as he unveiled cuts to income tax and stamp duty and a scrapping of a planned rises in business taxes
For small businesses
Federation of Small Businesses (FSB) is a trade association representing traders in the UK and insists that the Chancellor’s cash plan was good news.
Martin McTague (FSB chairman national) said that the Truss Government was off to a great start. The Chancellor delivered today’s pro-small businesses measures and rightly recognized the importance of removing taxes from jobs, investments and entrepreneurs for our economy.
‘Ministers need to be relentless in removing barriers to small business success – especially with the current headwinds.
“The Government today indicated that it will support small- and medium-sized businesses. We look forward to working together with departments and Ministers to create measures to assist small business growth and success.
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial, left, said ‘this is a great budget for business owners’ with Southampton-based business leader Mark Robinson, right, adding there were some ‘great announcements’
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: ‘This is a great budget for business owners. But it is a growth-gamble. It’s a growth-gamble if it succeeds. If not, it will lead to a further recession.
Mark Robinson (Managing Director of Albion Forest Mortgages, Southampton) stated that although there are some good announcements, they were a little too shortsighted.
Robinson said that he believes the necessary changes were long overdue because of rising house prices. It will be fascinating to see how lenders react in the months ahead, now that the tax rate is being eliminated.
Michelle Ovens founder of Small Business Britain said that the budget was a ‘good thing for small businesses, but noted there are still’serious problems in the short-term’.
Michelle Ovens is the founder and CEO of Small Business Britain. However, she welcomed the plan but warned that there are’serious problems’ for small businesses short-term. More was required
She explained that the Growth Plan statement today’s emphasis on Entrepreneurship was good news for small business and is a tremendously encouraging step toward supporting this vital part of an economy in tough economic times.
The energy plan that was already announced will reduce prices for small business and address some of our astronomical summer rises. This should give businesses some assurance over the winter months. But there is still uncertainty over long-term planning.
‘It is clear that small businesses will welcome the reduction of national insurance increases, IR35 regulations, and the proposed corporation tax increase next year.
This will promote and support entrepreneurial growth in the long-term, which is very much appreciated.
“However, there are still serious problems in the near term because entrepreneurs face rising costs in all aspects of their business and not only in tax and energy.
“More needs to be done at all levels and in government to make sure the UK’s small businesses can survive this winter, and to take full advantage of the support policies that were announced today.
“The direction of travel for small businesses is perfectly right.” All of us must now deliver it.
Hospitality
UKHospitality’s chief executive Kate Nicholls stated that while the announcement by the Chancellor included “numbers of positive steps”, she said that it was urgent for businesses in trouble to make it through winter.
She said: ‘Today’s announcement includes a number of positive measures which will bear fruit in due course, but more is urgently needed to help struggling businesses survive through the winter.
Kate Nicholls, Hospitality Chief, gives her opinion on the mini budget: While there are positive measures that will yield results in the future but much more must be done to ensure the survival of struggling companies through winter.
‘There’s a clear shortfall between the positive tax plans and the lack of needed immediate business support.”
Tim Martin, chairman of Wetherspoon, welcomed the freeze on alcohol duty. However, he stated that pubs pay much higher business rates per pint that supermarkets.
He said, “In addition to that, pubs also pay 20% CAT for food sales while supermarkets do not.”
“Solange this inequality persists pubs will continue their decline while supermarkets thrive.”
‘It’s an important principle of taxation, but also common sense, that taxes should be fair and equitable – which they’re not in this case.’
Annie’s Burger Shack’s director, who owns two restaurants located in Derby and Nottingham said that he couldn’t see how the announcement of a mini-budget would benefit the hospitality industry.
Annie’s Burger Shack director Daniel Griffiths is pictured here with Annie Spaziano, their fellow director, at their East Midlands restaurant
Daniel Griffiths, director of Annie’s Burger Shack, said: ‘This mini-Budget is defined not by what’s in it but what isn’t.
‘There is nothing here which I can see will benefit our struggling hospitality sector unless maybe your clientele are in the top bracket for earnings, which, for the majority of operators, they aren’t.
‘Other than that, customers have a 7p saving on a pint of beer, which is minimal when you consider the price of a pint is about £4, while basic income tax earners will save £600 a year, which they will have to spend towards their energy bills.
“The government should have considered freezing VAT again, as they did during the pandemic. This helped us, helped our customers and was mutually beneficial.
‘I know we’re not in a pandemic and I’m not saying they should bring out Eat Out to Help Out, but we are in another emergency that is a serious situation and they’ve not done anything for us.
“This mini-Budget is about jam tomorrow, and not jam today.”
Serina, manager at The Kebab Company (a Mediterranean restaurant/takeaway on Balham High Road in London), was worried that The Chancellor’s plans wouldn’t help small businesses.
She stated that the announcements made by the government were too small and too late. They are not ahead of the curve, but they should have done it all before.
“We required tax cuts and rates to be halted for business months ago, but many have already gone bankrupt or are on the verge of it.
“Combine this with rising energy, raw materials and staffing crises, you’ve got a toxic mixture that makes it impossible to operate a retail store in this country.
“It will not be long before it is back to the 1990s with abandoned ghost towns. Instead, billions were wasted on wasteful infrastructure projects and unutilized cycle lanes.
“This money could be used in a better way, but it was wasted. Many businesses now face collapse.”
Hoteliers
Sir Rocco Forte (a Conservative donor, chairman of Rocco Forte Hotels), welcomed Chancellor Kwasi Kwarteng’s raft on tax cuts.
On BBC Radio 4’s World At One, he said that he thought it was fantastic. This government came to power faster than any other.
“This is going be a tremendous boost to the economic and it’s only a beginning, I believe of the government’s plans.
“I find this very encouraging. This budget will benefit the enterprise and will enable individuals to reap all of the benefits of their hard work.
Chief night-time worker
Sacha Lord is Greater Manchester’s Nighttime Economy Advisor. She stated that Kwasi Kwarteng announced a small budget to send a strong message: They don’t care.
Sacha Lord, night time economy adviser for Greater Manchester. The mini-budget was condemned in a torrent of tweets following Mr Kwarteng’s speech.
He wrote: ‘Speechless. Zero VAT support or biz rate support for hospitality. If businesses don’t turn a profit or are closed, tax reductions by corporations are useless.
These announcements are the last orders of thousands of Hospitality Businesses, resulting in mass redundancies.
“I am absolutely sure. This Gov’t doesn’t care about the big businesses, large corporations or fat cats. The Government has just sent a clear message to the Hospitality sector: They don’t care. They’ve just abandoned small, family-run businesses.
Live music leaders in Britain also raised concerns Industry representatives claimed that the financial plans of the Chancellor offered little to assist struggling venues trying to survive the crisis in the cost-of living.
TLive’s chief executive said that businesses in trouble could face bankruptcy or closure if they don’t make ends meet.
Jon Collins commented that, ‘While it is pleasing to see Government take steps to reduce the cost-of living crisis’, today’s announcement does little to help the UK’s leading live music sector.
The Chancellor stated that jobs are already at a knife-edge and that we are in agreement with him about the barriers to entry in certain sectors, such as ours. This sector is where the UK has the most success.
Businesses that have been struggling to make a profit are likely to go bankrupt or close due the combination of falling public spending and increasing costs in the supply chain.
‘Only emergency measures we suggested to government will stop this. Those include injecting cash into struggling companies through a significant reform of rates and reducing VAT on tickets.
Michael Kill, the chief executive officer of the Night Time Industries Association (NTIA), stated that he was “extremely disappointed” by the Chancellor’s announcement.
He stated that it would be considered a wasted opportunity to assist businesses hardest hit by the crisis.
“We made it clear to the Government that even though the Energy Bill Relief Scheme announced limited tax cuts for national insurance, corporate tax and duty, this is likely to not be sufficient to guarantee businesses the financial stability they need to weather the winter. This was especially after yesterday’s Bank of England rate rise announcement.
He also said that he would ask the Government and the Chancellor of England to reconsider their measures. Given the small impact of tax cuts in this sector’s immediate crisis, as well as the vulnerable state the night-time industry and hospitality sectors are still in, they should re-evaluate including general business rate relief and cutting VAT.
Retail
Retail bosses have welcomed plans to reintroduce tax-free shopping in the UK for global tourists.
According to the Chancellor, the government will be consulting on the creation of a tax-free shipping program for Great Britain as well as modernizing the current scheme in Northern Ireland.
The £2 billion tax reduction forms part of £45 billion tax-cutting plans unveiled by Kwasi Kwarteng in Parliament on Friday.
The new Chancellor stated that this was a top priority for the great British retailers. It is also our priority.
This scheme allows tourists to get VAT back on products they bought in UK high-street shops and airports when they return it home.
The scheme was beneficial to retailers and businesses until January 2021 when Rishi Sunak, former chancellor of India, ended it.
According to the government, it is now gathering views about how to proceed with the scheme before a likely relaunch 2024/25.
Dee Corsi, the interim chief executive of the New West End Company welcomed the decision by the New West End Company to allow tax-free shopping overseas for visitors. He called it a “great victory for London’s International Centres”.
She explained that the West End is now able to compete against Paris, Milan, Madrid and other top destinations for leisure and shopping.
Dee Corsi is the interim chief executive at the New West End Company. This partnership includes 600 restaurants, hotelsiers, gallery owners, and retailers in London’s West End. He said that plans to bring back tax-free shopping for international tourists would allow the West End to compete with Paris, Milan, and Madrid.
‘In 2019 international visitors contributed over £28 billion to the UK economy.
‘The Government’s announcement is great news and – with new exciting new brands expected across the West End following today’s announcement that newly opened businesses will not be subject to business rates – we are confident that we can exceed this figure in the years to come.’
Paul Barnes is the chief executive officer of International Retail. He added that “The reintroduction and tax-free shopping would give retailers across Canada a needed boost in commerce as international buyers return to the UK.
“It allows us compete equally with European neighbors to attract high-spending international tourists back to our shops and hotels.
‘Today’s news brings with it a huge new tourist market of over 440 million people from the EU – now that Britain is the only country in Europe where EU visitors can shop tax free – which will be a significant shot in the arm to our retail, hospitality and tourism sectors across the country, with regional airports set to benefit from a surge in their visitor economies.’
“This is a great move by Government and it is expected to produce quick results, as foreign visitors return force-wide across the country.
The interest bill on the UK’s £2.4trillion debt mountain hit £8.2billion last month, the highest figure for August since records began in 1997
According to the IFS, the tax cuts are the largest since Anthony Barber’s Budget in 1972 when Ted Heath and he were trying generate a preelection boom.
Nigel Keal, chairman of UK Travel Retail Forum said that this is a great announcement from a government which has made it clear since the beginning that they intend to abandon Treasury orthodoxy in order to find new ways to create growth for the UK’s economy and its industries.
The effects of Brexit’s tax-free shopping was significant on travel sectors already under severe Covid epidemic.
“The return of tax-free shopping is a major boost for our industry and will place UK travel retailers at par with other countries around the globe.
Helen Dickinson is the chief executive officer of British Retail Consortium. She said that tax-free shopping for tourists was a welcome addition to the UK’s retail sector.
But, she demanded that business rates be raised before major increases to bills next year.
Her comments were further emphasized by her: “Retailers face immense cost pressures not only from rising energy prices but also from a weak Pound, rising commodity prices and high transport costs. This is in addition to a tight labor market, combined with the burden of government-imposed expenses.
‘Yet what was missing from today’s announcement, was any mention of business rates, which are set to jump by 10 per cent next April, inflicting another £800m in unaffordable tax rises on already squeezed retailers.
“It’s inevitable that these additional taxes will eventually be passed on to families as higher prices.”
Experts at Altus Group predicted that total business rates bill are due to jump by more than £5.3 billion once the end of discounts for retail, leisure and hospitality firms are also taken into account.
Financial firms
During his speech, the Chancellor stunned Westminster as he told the House of Commons he would ‘abolish’ the top rate of income tax altogether.
Kwarteng unveils largest tax cut since the 1972 ‘Barber Boom’ Budget
Ted Heath, Anthony Barber
Kwasi Kwartengs tax reduction plans have been praised as being the largest since Nigel Lawson’s Budget 1988.
However, in the event they were even larger at £45billion – unmatched since Anthony Barber’s fiscal package in 1972, when he was Chancellor under the premiership of Ted Heath.
However, the 50-year-old event is not the only comparison.
Barber and Heath were following what was later called a Thatcherite-free market approach.
The two were eager to encourage the economy and hold elections in 1974. This was a timeline similar to Liz Truss or Kwasi Kwarteng.
Barber cut taxes to the level of about 2 percent of the GDP.
He only contributed to inflation and wage demand, which led to the next year’s oil crisis and deep recession.
Heath was removed by Harold Wilson, Labour’s leader in February 1974 elections.
Wilson received a slim outright victory in the October 2002 second election.
He stated, “Take the additional income tax rate. It is currently at 45 percent, which is higher than headline top rates in G7 countries such as the US or Italy. It is even higher than the social democracy Norway. However, I am not planning to reduce the tax rate today. I will abolish it completely.
“From April 2023 we will have one higher income tax rate, 40 percent. This will make Britain less tax-intensive and more competitive. It will reward work and enterprise. It will encourage growth. It will help the entire country and economy.
Meanwhile, the total package tax cuts unveiled by the Chancellor – from now until 2026/27 – will cost £45 billion, according to figures published by the Treasury.
Government estimates also indicate that tax cuts in 2023/24 will be worth nearly £27 billion.
Paul Johnson is the director of Institute for Fiscal Studies. He stated that Mr Kwarteng’s budget included ‘50% more tax cuts than what we had expected’.
He told the BBC: ‘With £45 billion of tax cuts and a slowing economy, which means we’ll be borrowing more than we were expecting to be the case when the [Office of Budget Responsibility] last did its forecasts, adding this to our most recent forecasts, we can expect borrowing getting to over £120 billion in three years’ time.’
Nicholas Hyett from Wealth Club was also a proponent of the mini-budget. He said that it is likely the most pro-business budget in history. The chancellor took action to encourage Britain’s entrepreneurial spirit.
But Labour said the budget was a ‘plan to reward the already wealthy’ with shadow chancellor Rachel Reeves, accusing the Government of replacing levelling up with ‘trickle down’.
She told MPs: ‘What this plan adds up to is to keep corporation tax where it is today, and take national insurance contributions back to where they were in March. Some new plan.’
Lisa Hooker from PwC commented on the implications for retail and hospitality of the mini-budget. She said that there was a storm of headwinds facing retailers, consumers, and leisure businesses. There is likely to be a contraction in consumer spending, and inflation across the cost base. This includes not only energy, but also wages, commodities, and volatility in foreign currencies.
“Any assistance to increase spending or reduce costs is welcome.”
The sector awaits information on any cost-cutting measures, such as business rate reductions or investment for growth.
They won’t be able to spend the entire budget because of the rising inflation rates.
“The introduction of VAT-free shopping for foreign visitors is a welcome step for retailers, especially given the decrease in tourists to tourist areas. This will provide a boost for important high streets.
Eleanor Scott is the hospitality and leisure strategy director at the firm. She said: “The hospitality industry has faced a series of difficulties, including multiple cost pressures post-Covid, continued staffing problems, severe operating restrictions, and high inflation. There are also the possibility of a downturn for consumers.”
The UK hospitality report stated that around 20% of operators worry about survival in the future and three-fifths aren’t profitable at present. In this light, support measures will be welcomed.
“The industry will welcome the alcohol duty freeze. It will provide some needed support to it as it faces difficulties from less cautious consumer spending, staffing problems, inflation, and a shrinking cost base.
Was Kwasi Kwarteng right about his announcement of a mini-budget?
During his speech, Mr Kwarteng said there were ‘too many barriers for enterprise’ and that the Government is seeking to ‘break them down’ with a new approach.
He stated that his Cabinet colleagues would update the House over the next few weeks on all aspects of their ambitious agenda.
“These updates will be covered: The planning system, business regulations and childcare.
Additionally, the Chancellor spoke of his desire to simplify the tax system and promised that the Office of Tax Simplification would be ‘windowed’.
The Government will automatically sunset EU regulations by December 2023. This means that departments must review and replace EU laws or repeal them to aid businesses.
He also confirmed that stamp duties would be reduced, and told the Commons, “Homeownership is the best way for individuals to have an asset. It gives them a stake at the success of the economy as well as the society.”
“So, in order to promote growth and increase confidence as well as help families who are aspiring to own their homes, I am able to announce the reduction of stamp duty. In the current system, there is no stamp duty to pay on the first £125,000 of a property’s value. We are doubling that – to £250,000.’
Mr Kwarteng also said the stamp duty threshold for first-time buyers would be increased from £300,000 to £425,000.
He added: ‘We’re going to increase the value of the property on which first-time buyers can claim relief, from £500,000 to £625,000.
Rachel Reeves from Labour, shadow chancellor, has accused the Government that it replaced levelling-up with “trickle down” during Kwasi Kwarteng’s rebuttal.
“The actions we have taken today will mean that 200,000 people won’t be paying stamp duty at all. It is permanent, and effective as of today.
Kwasi Kwarteng the Chancellor abolished top rates of income taxes for highest-earning earners. In an effort to stimulate growth, and reduce the costs of living, he spent many billions of pounds.
The 45 percent higher income tax rate was scrapped and he brought forward the plan to reduce the basic rate to 19p per pound one year earlier than April.
Mr Kwarteng also revealed his estimate that the two-year energy bills bailout will cost around £60 billion over its first six months from October.
After the Bank of England had warned that the UK might be already in recession, Prime Minister Liz Truss signed a package which included tax cuts including the reverse of the rise of national insurance and the elimination of the increase to corporation tax.
The Chancellor said that redistribution has been a constant battle for too long. We must now focus on growth and not only how we spend our tax dollars.
We won’t apologize for managing the economy to increase prosperity and live standards. The whole focus of our efforts is to increase Britain’s global competitiveness, and not let Britain fall behind its competitors overseas.
The Prime Minister had promised that we would have a tax-cutting Government. We have reduced stamp duty today, allowed companies to save more money for innovation, growth, investment, and taxation. Millions of workers have seen their income taxes and national insurance cut. This is securing our position in an extremely competitive global market with lower corporate tax rates and personal tax rates.
“We pledged to prioritize growth. The new approach will bring about a new era. This country has a tremendous potential. We have promised to unleash it. All those promises have been fulfilled by our growth plan.