- Kwasi Kwarteng to present emergency mini-budget on Friday
- OBR will not publish detailed projections of related costs.
- We are looking at what can be included in the mini-budget
Britain’s new Chancellor of the Exchequer, Kwasi Kwarteng, will present an emergency mini-budget on Friday to provide more details on support to help ease the cost-of-living crisis.
Prime Minister Liz Truss took office on Sept. 6 and vowed to cut taxes immediately and redouble efforts to promote economic growth.
Many will be interested to hear the details of the massive cost of the plans, which are estimated to be in the range of £100bn to £200bn.
Britain’s new Chancellor of the Exchequer, Kwasi Kwarteng, will present an emergency mini-budget on Friday to provide more details on support to help ease the country’s cost-of-living crisis.
But they may be disappointed: The Office of Financial Responsibility will not release detailed forecasts next Friday, one of the sources said.
Below we outline the possible details that will be in the mini-budget and what it will mean for the pound in your pocket.
Here Sarah Coles, Senior Personal Finance Analyst at Hargreaves Lansdown, touches on some of the possible outcomes of a mini-budget and what that could mean for you:
Five options for lowering personal taxes — and their impact on sustainability
According to Hargreaves Lansdown’s Sarah Coles, these are five potential — or already confirmed — tax breaks:
1. Cancel the increase in national insurance compared to the previous year: Liz Truss has said this multiple times during the leadership contest, so it’s likely to be a key priority.
2. Elimination of “green” fees from electricity bills: This has already been announced under the Energy Price Guarantee.
3. Possible VAT reductions: The idea of a cut came up in the summer, and some suggested that the rate could be reduced from 20% to 15%.
4. There may be a deposit Rstudy the current tax system – including inheritance tax.
5. There may be a link to possible tax breaks for people who take time off from work to perform caregiving duties.
Short term increase
In the short term, tax cuts will free up more money to help people make ends meet, which could make a huge difference in the coming months for those already living from hand to mouth.
Truss said average household electricity bills would be held at around £2,500 a year for two years, preventing a major price spike expected next month that threatens the finances of millions of households and businesses.
Myron Jobson of Interactive Investor says of National Insurance: “There are rumors of a reversal of changes at NI, but it is not yet known what form this will take.
“Repeal of the 1.25% NI hike that went into effect in April will put tax pounds back in consumers’ pockets.”
Truss said average household electricity bills would be held at around £2,500 a year for two years, preventing the big price hike expected next month.
In many cases, the argument is that it will benefit those who earn more than those who earn less, because they pay more in national insurance for higher incomes and more VAT for more budget spending.
And while households will be grateful for any extra help to encourage more spending, this could lead to longer-term price increases, weakening the country’s financial sustainability in the long run.
Four Strategies That Can Help Boost Financial Resilience
Below, Hargraves Lansdowne describes four ways to ensure financial sustainability in a mini-budget:
1. More support for those with the lowest incomes
This could mean introducing additional subsidized electricity tariffs for those who face the biggest financial problems, or it could mean additional payments for those with the lowest incomes through the universal credit system.
This group would also benefit from a review of how benefits are re-evaluated. In times of high inflation, annual surveys with a long gap between measuring inflation and implementing it leave the lowest-income people in dire trouble.
If aid is offered to those who would not otherwise pay their bills, it will solve the deficit problem, not necessarily increase spending and put pressure on inflation.
2. Transition to Lifetime Isa
Helen Morrissey of Hargreaves Lansdown explains: “Currently, if you take cash from Lisa before you are 60 – for any reason other than buying your first property or retiring – you face a 25 percent fine.
“While it may seem like you’re just giving up a government bonus, it also takes away some of the money you’ve saved. This means that anyone who turns to this money when life is hard will pay a terrible price for trying to do the right thing.
“We want Lisa’s fine to be reduced to 20 percent to help people use their money in the way that makes the most sense for them, without losing some of their savings at a time when they can least afford it.”
3. Insulation revolution
Long-term energy cost reductions have so far focused on improving supply.
However, there is much that can be done to ensure that people do not have to use so much energy in the future.
Helen adds: “A revolution in thermal insulation is needed with effective incentives for people who can make affordable changes and support for those who cannot afford any work at all or whose homes require prohibitively expensive improvements.”
People who are forced to rob their pensions to pay bills or go back to work to cope with higher prices face a retirement headache.
4. Relieve retirement headaches
This should include a review of the annual allowance for the purchase of money.
Helen says: “People who are forced to rob their pensions to pay bills or go back to work to cope with higher prices face a retirement headache.
“The rules mean that once you have earned income from your defined contribution pension, you cannot contribute more than £4,000 a year.
“It was supposed to stop people…
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