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Nota Bene: 'Mr. Speaker, we come to tax — central to solving the riddle of growth'

kwasi-KWARTENG-gs0926
kwasi-KWARTENG-gs0926

Excerpts from Friday’s statement to the House of Commons by new British Chancellor of the Exchequer Kwasi Kwarteng.

Now, Mr Speaker, we come to tax – central to solving the riddle of growth. The tax system is not simply about raising revenue for public services, vitally important though that is. Tax determines the incentives across our whole economy. And we believe that high taxes reduce incentives to work, they deter investment and they hinder enterprise …

The interests of businesses are not separate from the interest of individuals and families. In fact, it is businesses that employ most people in this country. It is businesses that invest in the products and services we rely on. Every additional tax on business is ultimately passed through to families through higher prices, lower pay, or lower returns on savings.

So I can therefore confirm that next year’s planned increase in corporation tax will be cancelled. The U.K.’s corporate tax rate will not rise to 25 per cent — it will remain at 19 per cent. We will have the lowest rate of corporation tax in the G20…

But … we will do more to encourage private investment. The Annual Investment Allowance, which gives 100 per cent tax relief on investments in plant and machinery, will not fall to £200,000 as planned… It will remain at £1m. And it will do so permanently …

Mr. Speaker, for the tax system to favour growth, it needs to be much simpler. I’m hugely grateful to the Office of Tax Simplification for everything they have achieved since 2010. But instead of a single arms-length body … we need to embed tax simplification into the heart of government. That is why I have decided to wind down the Office of Tax Simplification, and mandated every one of my tax officials to focus on simplifying our tax code.

To achieve a simpler system, I will start by removing unnecessary costs for business. Firstly, we will automatically sunset EU regulations by December 2023, requiring departments to review, replace or repeal retained EU law. This will reduce burdens on business, improve growth, and restore the primacy of U.K. legislation…

Britain welcomes millions of tourists every year, and I want our high streets and airports, our ports and our shopping centres, to feel the economic benefit. So we have decided to introduce VAT-free shopping for overseas visitors. We will replace the old paper-based system with a modern, digital one. And this will be in place as soon as possible…

Our drive to modernise also extends to alcohol duties… (A)t this difficult time, we are not going to let alcohol duty rates rise in line with (the official price index). So I can announce that the planned increases in the duty rates for beer, for cider, for wine, and for spirits will all be cancelled.

Now, Mr Speaker, we come to the question of personal taxation. It is an important principle that people should keep more of the money they earn. And it is good policy to boost the incentives for work and enterprise.

Yesterday, we introduced a Bill that means the Health and Social Care Levy (an increase in payroll tax) will not begin next year… it will be cancelled. The increase in Employer National Insurance Contributions and dividends tax… will be cancelled. And the interim increase in the National Insurance rate, brought in for this tax year…will be cancelled…

Mr Speaker, I have another measure. Today’s statement is about growth. Home ownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society. So to support growth, increase confidence, and help families aspiring to own their own home, I can announce that we are cutting stamp duty (the tax on purchases of property)…

And Mr. Speaker, I have another measure. High tax rates damage Britain’s competitiveness. They reduce the incentive to work, invest, and start a business. And the higher the tax, the more ways people seek to avoid them, or work elsewhere or simply work less … rather than putting their time and effort to more creative and productive ends.

Take the additional rate of income tax. At 45 per cent, it is currently higher than the headline top rate in G7 countries like the U.S. and Italy. And it is higher even than (in) social democracies like Norway.

But I’m not going to cut the additional rate of tax today, Mr Speaker. I’m going to abolish it altogether. From April 2023, we will have a single higher rate of income tax of 40 per cent. This will simplify the tax system and make Britain more competitive. It will reward enterprise and work. It will incentivise growth. It will benefit the whole economy and whole country. And, Mr. Speaker, after all, this only returns us to the same top rate we had for 20 years.

And that’s not all. I can announce today that we will cut the basic rate of income tax to 19 per cent in April 2023 — one year early. That means a tax cut for over 31 million people in just a few months’ time. This means we will have one of the most competitive and pro-growth income tax systems in the world.

Mr. Speaker, for too long in this country, we have indulged in a fight over redistribution. Now, we need to focus on growth, not just how we tax and spend … (W)e are securing our place in a fiercely competitive global economy with lower rates of corporation tax and lower rates of personal tax.