On 23/09/22, Kwasi Kwarteng announced a polarising mini-budget. It contained significant tax cuts and several other alterations to the previous government's economic plans.
On 30/09/22, we collated these developments into one comprehensive article for you to digest. Many changes occurred across the lifespan of this mini-budget and the make-up of this Liz Truss' government, which we aimed to keep you updated with - bringing it back to what it all meant for the future of small businesses in the UK and the business owners who engage with our blog.
Now, one month after the proposal of the mini-budget - the UK government is in a state of disarray and looks completely different to how it did when Kwarteng made his first announcement.
There have been ongoing updates to the cabinet, policies, and promises the government is making. Here, we will give you a straightforward run-down of the timeline and, of course, what it means for you.
Where it started:
07/07 - Boris Johnson resigns over "party-gate", his role officially ending on 05/09/2022.
Rishi Sunak and Liz Truss engage in numerous debates over who will become the next leader of the Conservatives, and leader of the country.
06/06 - Liz Truss wins the leadership contest and becomes the prime minister. She has grand plans for the country and a route to how her team will lower the rising energy bills and build back our economy.
As your Prime Minister, I am confident that together we can ride out the storm, rebuild our economy and become the modern, brilliant Britain that I know we can be.
I will take action every day to make that happen 🇬🇧 pic.twitter.com/1Moqm3cSwu
— Liz Truss (@trussliz) September 6, 2022
She appoints long-time friend and colleague, Kwasi Kwarteng, as Chancellor of the Exchequer, who begins to work on the plan for how these actions will come into place. It is maintained along the way that the mini-budget was a joint effort between the two.
23/09 - The mini-budget is announced, and the pound drops massively in value. The government are confident that while this is not ideal, it is not a cause for concern as it will build back up with time.
03/10/22 - Tensions ran high in the Tory party. Mini-budget tax cuts are reversed.
14/10/22 - Kwasi Kwarteng is fired, and Jeremy Hunt is appointed as Chancellor.
The Rt Hon Jeremy Hunt MP @Jeremy_Hunt has been appointed Chancellor of the Exchequer @HMTreasury. pic.twitter.com/bldKWr3crG
— UK Prime Minister (@10DowningStreet) October 14, 2022
When Jeremy Hunt became Chancellor, he reversed almost all of the changes that Kwarteng and Truss had initially proposed in the mini-budget.
What was kept?
- A reversal in the proposed 1.25% increase in National Insurance contributions.
- Higher threshold on stamp duty for first-time buyers.
It is thought that Hunt may also have reversed other aspects of the budget - but they had reached a stage too far to go back on.
What does this all mean for small businesses?
24/10 - After Penny Mordaunt pulled out of the leadership race, the House of Commons announced that Rishi Sunak would be the new Conservative party leader; and, thus, the new prime minister.
Sunak's stance on supporting small businesses is clear, and he has already set out a few fundamental changes he plans to make.
It is widely accepted that small businesses are the backbone of the economy, so it is encouraging to see that the new leader has their best interests at heart.
Rishi Sunak became prime minister of the UK on 25/10/22
"I want them to know we will always stand behind them, which is why we have written to thousands of businesses across the country to highlight government support on offer to support them in the uncertain months ahead.
From cuts to employment taxes and business rates, to incentivising firms to train and invest more, we want to create the conditions for our SMEs to thrive, helping the economy to recover and grow, and support jobs."
In his own mini-budget that he proposed during his time as Chancellor, Sunak was criticised for his lack of SME support by Rick Smith of Forbes Burton, "In total, SMEs contribute more than £2.3 trillion to the economy in general and, despite this, are being truly left behind."
Several things point towards Sunak's commitment to supporting small businesses; we'll be watching closely to see how and where this is implemented. We hope that in an even more influential role, he will give more thought to those in need.
Amid the pandemic, Sunak was the one to introduce the furlough scheme for employees, as well as a £330 billion business emergency support programme.
Sunak consistently objected to Truss' plan to increase government borrowing to fund tax cuts - something that could have plunged the country into even further depths of debt and unrest.
Another thing that presents him positively against the past prime minister is that he predicted the problems in her financial proposals.
The reaction towards Rishi from MPs has been generally very positive, he gained many more votes than Mordaunt, and there is now a much larger sense of confidence and pride in the party. However, as this is the second prime minister we've had in as many months, opposition parties have called for a general election.
Hopefully, he will have a more prosperous time in power than his predecessor and use this time wisely to build up small businesses and the economy.
Corporation tax & small business
Earlier this year, while Sunak stood as Chancellor, he announced that corporation tax would rise from 19% to 25%. Kwasi Kwarteng planned to cancel the rise and keep it was 19%; this was later scrapped, and the rise was retained.
The increase in corporation tax results in everyone across the UK having to pay a higher rate of corporation tax, which could be especially damaging to small business already facing a tough time.
In 2023 the rate of corporation tax, paid on company profits, will increase to 25%. Even after this change we'll still have the lowest corporation tax rate in the G7.
We'll also protect small businesses so only 10% of companies will pay the full higher rate #Budget2021 pic.twitter.com/izwsLRLiXZ
— Rishi Sunak (@RishiSunak) March 3, 2021
There are a number of possible implications for small businesses, such as:
- Reduced profit margins
- Difficulty reinvesting in the business
- Potential job losses
It is yet to be seen what the full effect of the mini-budget and its reversal will be on small businesses in the UK. However, it is clear that there will be some challenges ahead for those running a small business.
Future of UK government
The state of the UK government over the past couple of weeks has been anything but stable. There has been a constant reshuffling in the House of Commons. Some MPs were sacked, some resigned off their own back, and some were pushed toward resignation by their fellow MPs and the public.
The prime minister is in the midst of a cabinet reshuffle, and when he faces his first PMQs later today, we should get a better view of their plan for the future of the UK economy and SMEs.
Kwasi Kwarteng and Jeremy Hunt both respectively proposed a "medium-term fiscal plan" announcement for 31st October. It was announced that Sunak will delay this by a further 2 weeks to 17th November, and has been upgraded to a full Autumn Statement.
Prime Minister @RishiSunak & Chancellor @Jeremy_Hunt have agreed the Autumn Statement will be delivered on 17 November with an @OBR_UK forecast. It will contain the UK's medium term fiscal plan to put public spending on a sustainable footing, get debt falling & restore stability. pic.twitter.com/3wiSAU1iaK
— HM Treasury (@hmtreasury) October 26, 2022
The announcements made in this fiscal plan should aim to put Briton's minds at ease and prove how the government plan to get the economy back on track.
The current state of the UK government is uncertain, and it is difficult to predict what will happen in the coming weeks and months. However, we hope Rishi Sunak is committed to supporting small businesses, and that he is successful in his endeavours. We aim to keep you updated with what happens and how it will impact you.
