More details on off payroll rules set to be announced later this afternoon
Jeremy Hunt has junked almost the entirety of his predecessor’s controversial plan for growth, just days after coming into office.
Only the planned cut to stamp duty and the reversal of the recent rise in national insurance survived the new chancellor’s knife, with plans to reform IR35 and cut corporation and income tax shelved and the energy price guarantee reduced in scope. Hunt said the moves would raise an extra £32bn per year.
Plans to repeal the burdensome IR35 off-payroll tax rules for contractors have also been ditched, which is likely to cause consternation in the freelance-reliant construction sector.
At the time of the change to the IR35 tax last month, Construction Products Association economics director Noble Francis said the government had cost time and money with their flip-flopping on the issue.
“The time and money wasted dealing with [IR35] in 2021, when contractors had to deal with materials availability and cost, rising PI insurance and reverse charge VAT, only for IR35 changes to be repealed, is staggering,” he said.
In a broadcast statement this morning, Hunt said the prime minister had “listened to concerns about the mini-budget” which had seen the pound plunge and the cost of government borrowing spiralling.
The scrapping of the 45% higher rate of income tax and the cancellation of the rise in corporation tax to 25% had already been announced when Kwasi Kwarteng was still chancellor, and the cut to the basic rate has now gone the same way.
Last week, one industry chief tore into the government’s abandoned plans to abolish the 45p rate of tax saying the original decision taken by prime minister Liz Truss and then chancellor Kwasi Kwarteng made the pair “look like they’re from junior school. No two sane people would have come up with such a stupid thing.”
Hunt also confirmed that the government’s “landmark” energy price guarantee would go ahead as planned but only until April, after which more targeted measures would be used.
A Treasury-led review will determine the details of this, with the chancellor saying that it “would not be responsible” to expose public finance to international energy price fluctuations in the long-term.
Hunt said that “governments cannot eliminate volatility in markets but they can play their part and we will do so” and told the public to expect “more difficult decision on both tax and spending”, with all government department needing to find savings.
Speaking before Hunt’s announcement, Mace chief executive Mark Reynolds told the BBC: “The uncertainty [of the past few weeks] has been horrendous for most businesses. People just can’t plan for the future.”
The chancellor is set to make a full fiscal statement on 31 October – which had already been moved forward from mid-November – but said he wanted to set out his plans immediately in order to “reduce unhelpful speculation”.
He was given special permission from the speaker of the House of Commons to make a statement this morning, ahead of his briefing to parliament at 3.30pm this afternoon, as the government attempted to calm markets.