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ICAEW comments on mini-Budget

Author: ICAEW

Published: 23 Sep 2022

Reacting to the Chancellor’s mini-Budget, Iain Wright, ICAEW Managing Director, Reputation and Influence, said:

“This was a very bold mini-Budget, in which the Chancellor focused on growing the economy to reach a 2.5% trend growth rate, an ambitious level but one which is also a real gamble on the economy and public finances.

“Businesses will be pleased with the pledges on investment and planning reform, but energy remains the biggest challenge. Although there’s certainty for the next six months, firms don’t know what will happen at the end of that period, and we hope the government will respond flexibly to provide support where needed.

“Whether the boldness in approach turns to recklessness remains to be seen. We will continue to work with BEIS and other government departments to raise and address any issues.”

Commenting on the economy, Suren Thiru, ICAEW Economics Director, said:

“The Chancellor’s eye-watering intervention is an astonishing gamble on the future of the UK economy and the public finances.

“Cutting taxes is unlikely to generate the extraordinary jump in growth needed to achieve their policy aim and could make matters worse by fuelling inflation, pushing interest rates higher and undermining our credibility with international investors.

“Businesses, though, will be encouraged by the promise of supply side reforms, including the long-awaited changes to the sluggish planning system, which are vital to sustainably boosting the country’s growth prospects.

“However, the subsequent declines in sterling and rise in government borrowing costs highlight the need for a credible plan on how this fiscal support will be paid for, which is key to maintaining international confidence and strengthening our economic prospects.”

Commenting on the tax measures announced, Frank Haskew, ICAEW Head of Taxation Strategy, said:

“The abolition of the 45p additional rate was the surprise of the Budget. The Chancellor also brought forward the 1% reduction in the basic rate by a year.

“While the off payroll working rules have been repealed, the IR35 rules remain and the position will be returned to that which existed from 2000 to 2017, so employers won’t be responsible for determining whether a payment to a personal service company is within or outside the IR35 rules.

“The abolition of the Office for Tax Simplification throws the challenge back to HM Treasury and HMRC, and it will be interesting to see their responses in terms of the mandate to simplify the tax system.

“Businesses will be pleased that the temporary £1m annual investment allowance limit, which was due to revert to £200,000 on 1 April 2023, will become permanent, as it will provide certainty in planning.”

Commenting on the public sector, Alison Ring, ICAEW Director for the Public Sector, said:

“This was a budget statement full of shock and awe as the Chancellor started to reshape the tax system, betting big in the short-term on the promise of growth in the long-term.

“Today’s announcements imply the deficit for the current financial year could now end up between £150bn and £200bn, while public sector net debt is now on course to exceed £2.5trn by next March. We will find out more once the Office for Budget Responsibility provides its next forecast.

“Missing was any detail on public spending, leaving unanswered the very big question of the extent to which these tax cuts will be matched by cuts in spending on welfare and public services.”