Ensuring Financial Sustainability

Today the Chancellor has brought forward measures from the Medium-Term Fiscal Plan to support fiscal sustainability.

A central responsibility for any Government is to do what is necessary for economic stability. This is vital for businesses making long term investment decisions and families concerned about their bills, their mortgages, and the cost of living.

• Since last month, global economic conditions have worsened – and because of this we have had to adjust our programme. Interest rates are rising globally, we need to act in a responsible way.

• That is why we have decided to make further changes to the Growth Plan – we will not be proceeding with the planned cuts in corporation tax, income tax, or the majority of other planned measures – and will review the energy bill support package after April 2023 to help those most in need.

• The Conservatives are committed to long term reforms and going for growth – but we need to change the way we approach this. We are committed to delivering Investment Zones, speeding up road projects, standing up to Russia, and increasing our energy supply so Britain is never in this situation again.

• We remain confident about the UK’s long term economic prospects as we deliver our mission to go for growth – but growth requires confidence and stability, so we will always pay our way – and will make whatever tough decisions necessary to ensure we do.

We will put public finances on a stable footing by

• Keeping the basic rate of income tax at 20 per cent. Cutting tax is a deeply held Conservative value – but at a time when markets are rightly demanding evidence of commitment to sustainable public finances, it is not right to borrow to fund this tax cut. Because of this, the basic rate of income tax will remain at 20 per cent – and it will do so indefinitely, until economic circumstances allow for it to be cut.

• Proceeding with the planned rise in corporation tax to 25 per cent. Given the exceptional circumstances, we are keeping the increase in corporation tax that was planned by the previous government. This will raise £18 billion per year, and act to restore the public finances and market confidence in the UK’s fiscal discipline.

• Taking the difficult decisions to get debt falling as a share of the economy over the medium term. There will be more difficult decisions to take on both tax and spending – all government departments will need to redouble their efforts to find savings.

• We have to recognise that the need to follow and be seen to follow fiscal responsiblity necessitates a chance of course, and this includes reversing most of those tax measures announced in the Growth Plan three weeks ago that have not been legislated for in Parliament. the government will no longer be proceeding with: the cut to dividend tax rates; the reversal of the off-payroll working reforms introduced in 2017 and 2021; the new VAT-free shopping scheme for non-UK visitors; or the freeze to alcohol duty rates.

• Publishing a Medium-Term Fiscal Plan on 31 October, setting out our responsible fiscal approach. The Chancellor will deliver the full Medium-Term Fiscal Plan to be published alongside a forecast from the independent Office for Budget Responsibility on 31 October.

Reviewing the Energy Price Guarantee:

The Energy price guarantee will be continued in its' present form until at least April 2023. The government will continue to protect households against excessive energy bills after that date.but is reviewing how to do that as effectively as possible.

• The Conservative government will maintain the planned level of support between now and April 2023. This is a landmark policy, supporting millions of people through a difficult winter and meaning they have not had to face bills of £6,000 this winter. We can confirm that the support we are providing between now and April next year will not change. 

• There will be a Treasury-led review into how we support energy bills beyond April next year. The review’s objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need. Any support for businesses will be targeted to those most affected. And the new approach will better incentivise energy efficiency.

The government will continue to go for growth by: 

• Delivering support for families who needed it most – dealing with the tax burden by cutting National Insurance tax. We have scrapped the National Insurance levy, a tax cut for 28 million people worth on average £330 a year – helping hard working people to keep more of the money they earn.

• Launching Investment Zones, unlocking housing and driving growth through tax incentives. Investment Zones will drive growth and unlock housing by liberalising planning and delivering wider support for local economies that have been left behind for too long. We will also work with devolved administrations to look to establish Investment Zones in Scotland, Wales and Northern Ireland. 

• Stopping Labour-backed strike action from slowing down Britain. We will introduce Minimum Service Levels for transport services in Great Britain, ensuring militant strike action cannot derail economic growth, and union bosses cannot hold working people to ransom. 

• Accelerating infrastructure projects across the country. We have announced over 100 infrastructure projects from transport to energy and telecoms that we will accelerate to help to grow our economy.

• Speeding up delivery to unpick the complex patchwork of restrictions and EU-derived laws. We will streamline a host of assessments, duplications and regulations whilst ensuring essential protections remain in place that will finally get the infrastructure we need built more quickly.

• Continuing to support homeownership. We will enable crucial planning reforms and increase the disposal of surplus government land to build new homes. We will also maintain the announced stamp duty cuts to drive homeownership.