September 2022 United Kingdom mini-budget

September 2022 (September 2022) United Kingdom mini-budget

Presented	23 September 2022
Parliament	58th
Party	Conservative Party
Chancellor	Kwasi Kwarteng
‹ October 2021 2022 autumn statement›

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On 23 September 2022, the Chancellor of the Exchequer, Kwasi Kwarteng, delivered a Ministerial Statement entitled "The Growth Plan" to the House of Commons.^[1][2] Widely referred to in the media as a mini-budget (it not being an official budget statement), it contained a set of economic policies and tax cuts such as bringing forward the planned 1% cut in the basic rate of income tax to 19%; abolishing the highest (45%) rate of income tax in England, Wales and Northern Ireland; reversing a plan announced in March 2021 to increase corporation tax from 19% to 25% from April 2023; reversing the April 2022 increase in National Insurance; and cancelling the proposed Health and Social Care Levy.^[3][4][5] Following widespread negative response to the mini-budget, the planned abolition of the 45% tax rate was reversed 10 days later, while plans to cancel the increase in corporation tax were reversed 21 days later.

The mini-budget was among the first measures of the Truss ministry, which had begun on 6 September. The statement was delivered against the backdrop of a cost-of-living crisis and was immediately followed by a sharp fall in the value of the pound sterling against the US dollar as world markets reacted negatively to the increased borrowing required. They also appeared to be concerned that no independent forecast by the Office for Budget Responsibility (OBR) had been published. By the next day of trading, the pound had hit an all-time low against the US dollar. The mini-budget drew widespread criticism from economists, some of whom feared that its reliance on increased government borrowing to pay for the largest tax cuts in 50 years could lead to a situation similar to the 1976 sterling crisis when the UK was forced to ask the International Monetary Fund (IMF) for a financial bailout. The IMF took the unusual step of issuing an openly critical response to the budget, saying it would "likely increase inequality".^[6] It urged the UK government to "re-evaluate" the proposed tax cuts.^[7] HM Treasury announced plans to outline in November how the proposals would be costed, this being later brought forward to 31 October, alongside an independent forecast from the OBR.

Despite continued market turbulence, and calls from Members of Parliament including members of the Conservative Party for a policy reversal, Prime Minister Liz Truss and Kwarteng maintained that the proposals outlined in the mini-budget would go ahead. Speculation began to mount about Truss's future as prime minister, and on 14 October she summoned Kwarteng back to the UK from a meeting of finance ministers in Washington, D.C., and asked for his resignation.^[8] Truss then appointed Jeremy Hunt to replace him. Hunt subsequently reversed the majority of the tax cuts that had been outlined in the mini-budget, a decision that led to a positive market reaction. Following Truss's resignation on 25 October, her successor Rishi Sunak retained Hunt as Chancellor. The 31 October statement was moved to 17 November in order to base it on the "most accurate possible" economic forecasts, and was also upgraded to a full autumn statement.

Initial reaction to the mini-budget was mixed. The Daily Mail called it a "true Tory budget", while Frances O'Grady, the General Secretary of the Trades Union Congress, branded it "Robin Hood in reverse". Faisal Islam, the BBC's economics editor, described the mini-budget's reversal as "the biggest U-turn in British economic history".^[9] William Keegan, the former economics editor of The Observer, wrote that the plans outlined in the statement had shown a misunderstanding of Thatcherism and its attitude towards taxation.