The ‘mini-budget’: what has happened and what does it mean?

Budget tax cuts will disproportionately benefit the wealthiest, while those on lower incomes are left facing the brunt of inflation and long-term unaffordability in many aspects of life.

Chancellor of the Exchequer, Kwasi Kwarteng MP, made his first big appearance today as he delivered a ‘mini-budget’ to the House of Commons outlining the UK Government’s plan on the economy moving forward.

Earlier this week, we wrote what we were hoping to see from this mini budget. We wanted to see targeted and effective measures to tackle the cost of living, investment in social work, and support for the social work workforce.

What did the Chancellor say?

  • The National Insurance increase (the Health and Social Care Levy) that was introduced in the summer will now be scrapped in November.
  • Basic rate of income tax will be cut to 19% in April 2023, and removing the 45% tax bracket
  • Reiterated the energy price cap which will mean that the average household energy bill will not go above £2500 per year
  • The Government will reduce people’s benefits if they do not fulfil search requirements to find work
  • Scrapping the cap on banker’s bonuses
  • IR35 reforms repealed meaning that workers will be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions

Whilst the £2500 figure for average household energy bills has dominated headlines, this does not mean that households will not pay more than that. The cap is on the unit of energy, and not on the overall bills. Larger houses that use more energy will spend more than £2500.

Smaller households that use less than £2500 a year worth of energy will pay less, but this will still be a significant increase on what they paid in previous years. Households will still struggle to navigate how rocketing energy prices can be paid for out of small, limited household budgets.

What didn’t the Chancellor say?

The Chancellor didn’t announce any new measures that would help those on the lowest incomes, such as rises in Universal Credit or other benefits to cover the cost of living. Instead, the Government are going to make it harder for benefits claimants by reducing benefits if they do not satisfy Government requirements when job seeking.

Speaking in response to the budget, BASW Chief Executive Dr Ruth Allen said:

“This is a budget focused on delivering tax cuts that will disproportionately benefit the wealthiest, while those on lower incomes, Universal Credit and disability benefits are left facing the brunt of inflation and long-term unaffordability in many aspects of life.

“People on Universal Credit which is already punitive will face tougher sanctions if they do not satisfy Government job seeking requirements.

“We needed this budget to alleviate poverty, invest in our public services, infrastructure and workforce, and act with leadership to reassure the whole population that better times - economically and socially - are possible.  This budget fails to do that and its economic approach risks high inflation and interest rates for the longer term.

“It leaves social care and health services and workers not knowing when the tide with be turned on long-term underfunding and lack of a coherent, credible plan for the safe, high-quality services we all need.”