The Growth Plan 2022
The Chancellor of the Exchequer's Growth Plan is a one-off statement to announce new economic measures to help businesses and households across the country. The Plan comes as inflation hit 9.9%, the Bank of England raised interest rates for the seventh time in a row, and energy bills and utilities costs reach eyewatering levels.
Unlike the Autumn Budget, in which a plethora of measures are typically announced spanning a number of major policy areas, the Growth Plan contains fewer commitments and is instead an emergency announcement to help revive the country's economy, increase its revenues, and prevent a substantial increase in the national debt.
Energy and Inflation
In the short term, the Government will intervene with fiscal support for households and businesses through the current period of rising energy prices. Chancellor Kwasi Kwarteng (pictured) announced a wide-ranging package of supply-side reform and tax cuts with the aim to boost trend growth to 2.5%. The Energy Bill Relief Scheme announced will protect businesses and other non-domestic energy users, charities and public sector organisations, by providing a discount on wholesale gas and energy prices. The Government will publish a review into the operation of the scheme in three months to inform decisions on future support after March 2023, focusing in particular on identifying the most vulnerable non-domestic customers and how to continue assisting them with energy costs. The introduction of the scheme is expected to reduce inflation by around four per cent.
The Government has committed to cancelling the incoming increase to 25% of the main rate of Corporation Tax, instead keeping the rate at 19%. Additionally, the Chancellor announced that the Government will make permanent the temporary £1 million level of the Annual Investment Allowance, which was due to expire after 31 March 2023.
The Government will work with MCAs and local authorities to introduce investment zones across the country. Areas within investment zones will benefit from tax incentives, planning liberalisation and broader support for the local economy. Proposed interventions include lower taxes, accelerated development, streamlined planning applications and a range of tax incentives, such as enhanced capital allowances, business rates relief and enhanced structures and buildings allowance.
The Chancellor introduced significant changes to Stamp Duty, doubling the amount to initial amount to pay on a property's value from £125,000 to £250,000. The threshold at which first-time buyers begin to pay Stamp Duty will increase from £300,000 to £425,000, and the maximum value of a property on which first-time buyers' relief can be claimed will also increase from £500,000 to £625,000.
The Chancellor also revealed that new legislation will be introduced to unpick planning restrictions that constrain growth. This new piece of legislation, identified in the Growth Plan as the Planning and Infrastructure Bill, will accelerate priority infrastructure projects by minimising the burden of environmental assessments, making consultation requirements more proportionate, reforming habitats and species regulation and increasing flexibility to make changes to a Development Consent Order. The Government's Growth Plan also highlights sector-specific changes to accelerate infrastructure delivery. These include bringing onshore wind planning policy in line with other infrastructure to allow it to be deployed more easily in England whilst also delivering reforms to accelerate the delivery of roads through a more streamlined consent process.
In order to stimulate growth across the country, the Chancellor has introduced a variety of tax cuts: the basic rate of income tax will be cut by 1p down to 19p from April 2023, and the 45p tax rate for top earners earning over £150,000 will be abolished from April 2023. Additionally, the National Insurance Contribution hike - otherwise known as the Health and Social Care Levy - will be reversed from 6th November. Taxes will also be cut for businesses in designated sites for ten years to support investment, jobs and growth.
The Chancellor also shared plans to abolish the Office of Tax Simplification, setting a mandate to the Treasury and HMRC to focus instead on simplifying the tax code. The Chancellor also announced VAT-free shopping for overseas visitors and has cancelled planned duty rises on beer, cider, wine and spirits.
The Bankers' bonus cap, which currently limits remuneration of certain bank staff to 100% of their fixed pay or 200% with shareholder approval, will also be scrapped. The Chancellor's aim is to encourage increased financial services activity within the UK through this removal.
What are the GBCC's views on the 2022 Plan for Growth?
Although much had been revealed in the preceding days, there were a number of announcements made in this morning's Growth Plan which will reassure businesses. It was pleasing to see the Chancellor heed calls to reverse the recent increases to National Insurance and introduce VAT-free shopping for overseas tourists, measures which have long been championed by the GBCC.
Many will also welcome the proposed focus on accelerating infrastructure development across our region and the use of investment zones to stimulate growth across the country as whole. The key is to learn from previous iterations of this scheme to ensure it brings genuine prosperity to areas which have suffered from decades of underinvestment. Retaining the current level of the Annual Investment Allowance will also help to provide a major incentive for firms to crowd in investment.
The Government will no doubt hope that reversing proposed Corporation Tax rises will drive further foreign investment; however, this will do little to help those businesses that are struggling to turn a profit and dealing with debts accrued during the pandmic. Although many businesses will also no doubt benefit from the energy price cap, many still face an uncertain future as supply chain disruption, labour market shortages and rising inflation continue to bite.
We would urge the Government to keep a number of options on the table, particularly focusing on offering VAT relief to hospitality and non-essential retailers, continued reform of the business rates system, and expanding the shortage occupation list in order to help those businesses that are haemorrhaging cash.
As always, the GBCC will continue to work on behalf of the business community to understand the impact these announcements will have on local firms and work on their behalf to ensure their views are clearly reflected in regional and national priorities moving forward.