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What to expect from the September mini-budget

Chancellor Kwasi Kwarteng is due to announce a mini emergency budget tomorrow (23 September) as the new government makes its first attempt to address the UK's cost of living crisis.

As reported by The Times, Kwarteng is expected to announce tax cuts to the tune of £30 billion, scrapping a planned rise in corporation tax to 25% scheduled to come into effect in April 2023.

The new government also plans to stop the 1.25% national insurance rise first introduced in April 2022.

The Guardian reported Kwarteng plans to cut benefits for part-time workers, requiring them to work longer hours or take steps to increase their earnings.


Cost of living issues to address:

HR priorities for next prime minister

Cost of living driving low paid workers to food banks

More than a million key worker children to reach poverty in 2023


Shakil Butt, founder of HR Hero for Hire, told HR magazine the government would be taking a risk by using tax cuts to boost the economy.

He said: "With a slowing economy, cutting taxes will mean more government borrowing and is a risky option to boost the economy when there is no evidence to support tax cuts pay for themselves through higher levels of growth. Tax cuts for tackling the cost of living crisis is challenging because the money you get back is relative to the money you have coming in.

"So in real terms the benefit is based on the level earnings. Or to put it another way, short-term gain with longer-term pain but don’t worry if it all goes pear-shaped there is always the actual full budget announcement a few months from now."

Any increase in taxes should see wealthier people pay more to help wider society, Butt added.

He said: "The government does need to raise money to run services from infrastructure to healthcare but should it tax everyone equally when the reality is wealth is not distributed equally. There is inequity in taxing individuals and businesses without taking into account their financial reality.

"Those that can pay more tax should pay more tax to help those in our society to be supported rather than turning a blind eye to the growing numbers of our society who are turning to foodbanks."

 

Help for the self employed

Dave Chaplin, CEO of Contractor Calculator said government should consider the needs of self-employed workers in the mini-budget.

He told HR magazine: “The Conservative government purports to be the party and government of small business but over the years it has taken a number of measures and introduced a raft of legislation that has served to punish small businesses.

"We are in the midst of a recession so it is vital the chancellor takes steps to grow the economy; it can start by removing the barriers preventing businesses from hiring the self-employed."

Prime minister Liz Truss had already promised to review IR35 tax regulations while campaigning in August.

The regulations came into effect in April 2021 and meant employers became responsible for determining a worker's employment status, handling tax and national insurance contributions for self-employed contractors and agency workers.

Chaplin added: “Liz Truss promised a review of IR35 if she became prime minister. Now, having secured that role, she needs to keep her promise and take steps to conduct a proper review because off-payroll has had a punitive impact on our economy and we need certainty now, more than ever.” 

"Hiring firms need certainty and to understand their position on workers’ rights and tax. Currently, employment status is complicated and messy and hiring firms are reluctant to engage flexible talent for fear of facing the brunt of HMRC and a hefty tax bill many years later that could potentially lead them to financial ruin."

As complications arose around employment status, evidenced in the Supreme Court ruling which classed Uber drivers as workers, the government set out new guidelines on the definitions of employee, limb worker and self employed in July this year.

 

Help with energy bills

The mini-budget may also expand on the Energy Bill Relief Scheme for businesses, designed to cut energy costs in half for companies by providing them with a discount on wholesale gas and electricity prices.

Kate Shoesmith, deputy CEO, Recruitment & Employment Confederation said: “We greatly welcome the government’s Energy Relief Scheme which will cut prices for business as well as other non- domestic organisations for six months. This will provide a much needed life line for many small businesses in particular.

"Although this is much needed relief, as we have said to the chancellor, Kwasi Kwarteng in our budget submission, businesses need longer-term stability at a time of economic uncertainty.

“We would encourage the BEIS and the Treasury to be thinking ahead to how quickly they can give businesses more guidance on further support to help them plan the cost of goods and services for the next year followed by a review. As ever we want to work with the government to create a growth in the economy.”

This year's Spring Statement published by former chancellor Rishi Sunak in March, which included income tax cuts for workers and an increase in the national insurance threshold, came under heavy scrutiny, as many felt it failed to properly address cost of living issues. 

Amid the cost of living crisis, the real living wage for workers in the UK has now risen a record 10% to £10.90 an hour for workers outside of London, and £11.95 for London-based employees.

This will affect more than 400,000 workers whose employers have signed up to be Living Wage employers.

Charles Cotton, senior reward adviser for the CIPD said: “This is a significant increase to the real Living Wage and shows the importance of fair pay and good work for UK workers. While the increase in the real Living Wage will be welcome by thousands of low-waged workers, it may not be enough to improve financial conditions for some of the lowest paid employees, in the current cost of living crisis.

“Employers should also consider other ways they can support employee’s financial wellbeing. As well as offering enough hours for staff to have a decent standard of living, organisations should review aspects of employment such as flexible working, career progression opportunities, and financial wellbeing benefits, for example occupational sick pay or hardship loans."

 

Worker safety

Crawford Temple, CEO of Professional Passport, said government should provide workers with help to stop them falling prey to disguised remuneration schemes that pay in 'loans' instead of income to avoid income tax and national insurance contributions.

He told HR magazine: “Faced with financial hardship, I fear that some workers may be enticed to sign up to tax avoidance or disguised remuneration schemes that promise more take-home pay. The off-payroll legislation that was rolled out into the private sector in April 2021 along with the cost of living crisis have combined to create the perfect storm for dodgy schemes to flourish.

"We are now seeing a proliferation of schemes that need to be shut down. For far too long HMRC has not been visibly proactive in enforcing the law and stamping out the corrupt schemes that have caused significant damage to lives and livelihoods. Enough is enough. HMRC already holds all the information it needs to rid the sector of disguised remuneration schemes and rid the industry of criminal activity but is not acting on it."

Kwarteng is set to make the announcement to the House of Commons on 23 September.