Chancellor Kwasi Kwarteng has unveiled a mini-budget outlining the government’s plan to help with the cost of living crisis.
The policies are designed to stimulate economic growth, according to the chancellor, through cuts on both income and corporation tax, infrastructure projects, strike legislation, and the creation of investment zones.
Kwarteng announced the planned increases in duty rates for beer, wine, and cider will be cancelled.
He also said the government will introduce legislation to combat key infrastructure from being affected by industrial strike action. New laws will require union members to vote on pay offers.
Kwarteng confirmed the cap on bankers’ bonuses will also be scrapped, while next year’s increase in corporation tax from 19% to 25% will be cancelled.
The government plans to expand the supply side of the economy through tax cuts to target economic growth of 2.5% per year. It will create c40 investment zones with tax breaks for businesses.
Additionally, the additional 45% top rate for income tax will be scrapped, while the basic rate of income tax will be cut from 20% to 19% in April 2023. The national insurance rise introduced earlier this year will be reversed from 6 November, and stamp duty will be cut for those buying property in England and Northern Ireland.
Responding to the chancellor’s statement, Nicolas Burquier, MD for Pizza Hut Europe & Canada, said: “Combined with the recently announced support on energy bills, the tax changes and Investment Zones unveiled today, all will offer some much needed short-term respite for many hard-pressed restaurants and takeaway owners like our franchisees as we head into the winter.
“While there’s more to be done, particularly around rising supply chain costs and an endemic labour shortage crisis - we look forward to continuing to work with the Government to ensure that our franchisees, and the wider hospitality industry, receive the sustained support it needs as the sector looks to recover from current setbacks.”
Kate Nicholls, CEO of UKHospitality, also called for sector-specific support.
She commented: “The stated objectives of boosting growth and tackling inflation rightly put business at the heart of the Govt’s agenda, but today’s measures will take time to take effect.
“The Chancellor committed to making the UK a globally competitive tax regime, yet overlooked two obvious levers to achieve that, through lower VAT and business rates reliefs. Our VAT rate is the highest in Europe, which is starkly at odds with ambitions for global tax competitiveness and will hopefully be addressed in the autumn Budget, if not before.
“Our VAT rate is the highest among modern economies, so if we want a globally competitive market, we need lower VAT and an equitable alternative to business rates. Without such measures - which would help to keep prices down for customers - thousands of businesses and many more jobs will be lost.”
“Confirmation of the energy and NIC proposals will allow our businesses to better plan for survival. Indeed, 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. There’s a clear shortfall between the positive tax plans and the lack of needed immediate business support.”
Emma McClarkin, CEO of the British Beer and Pub Association, also called for the continued reduction of the tax burden on the sector.
She commented: “We welcome the steps taken by the Government in the Chancellor’s fiscal statement. The measures announced today will mean a boost of £500m for our sector, enabling growth following successive crises and allowing us to thrive in the future. Coupled with this week’s intervention on energy bills, these commitments will make a significant difference to our pubs and brewers at an acutely difficult time.
“The Chancellor’s plans show that the Government recognises how extreme the cost of doing business has become and the enormous investment our sector makes, not only in the economy, but to the social fabric of communities across the breadth of the UK and why it must be protected. We look forward to the continued reduction of taxation on the sector at the next Budget - the need for a reduced VAT rate for hospitality and business rates reliefs remain as strong as ever.
“We will continue to work with the Government to ensure that reforms to the draft beer duty rates are brought forward as soon as possible, meaning that our pubs and brewers can contribute to, and be at the heart of villages, towns and cities for many years to come.”
Michael Kill, CEO of the Night Time Industries Association, expressed disappointment that the government has yet to re-evaluate business rates and VAT reductions.
He said: “We are extremely disappointed with the Chancellor’s announcement this morning. It will be seen as a missed opportunity to support businesses that have been hardest hit during this crisis, causing considerable anxiety, anger and frustration across the sector as once again they feel that many will have been left out in the cold.
“We have been extremely clear with the Government that the “Energy Bill Relief Scheme”, even with the announcement of the limited tax cuts on National Insurance, Corporation Tax and Duty, is unlikely to be enough to ensure businesses have the financial headroom to survive the winter, especially with yesterday’s announcement of the rise in interest rates from the Bank of England.
“I would urge the Chancellor and Government to reconsider these measures, given the limited impacts of the current tax cuts on the immediate crisis for many businesses across the sector, the extremely vulnerable position the night time economy and hospitality sectors remain in, and re-evaluate the inclusion of general business rates relief and the reduction of VAT within these measures.”
Steve Alton, CEO of the British Institute of Innkeeping, commented “Today’s announcement by the Chancellor does not address the vulnerability of our members’ pubs in every community. The energy price guarantee, whilst welcome, will see most pubs at least doubling their energy costs from last year in addition to the inflationary pressures on their costs of doing business.
“We are hopeful that a number of his measures will support consumer confidence and maintain demand at this now critical period of trading. His recognition of too many barriers to enterprise must now also translate into radically reduced regulation allowing our members to trade fully and freely alongside delivering a significant reduction in the ongoing disproportionately high business rates that our members pay.
“We will continue to engage and make the case to Government for our members as they conduct their review into vulnerable sectors with the Prime Minister having previously referenced our local pubs. Simply without further support many pubs will fail.”
