From National Insurance to investment zones: What the mini budget could mean for people in Wales

Planned tax cuts are likely to be accompanied by a clampdown on some people who claim benefits. Credit: PA

What's happening on Friday has been called a variety of names: budget, emergency budget, fiscal event.

Whatever you call it, the announcements made by the Chancellor of the Exchequer will mark the start of a significant shift in economic and political direction, a change that will affect us here in Wales and shape politics here in Wales over the coming years. 

It has already been announced that the planned rise in National Insurance will be scrapped, but the UK Government is likely to also implement further measures which will benefit high earners - for example through removing the cap on bankers' bonuses - which they believe will increase economic growth overall. 

Some Conservatives see it as the first chance they've had to pursue a 'pure' Conservative agenda since the later part of Margaret Thatcher's time in office. 

Coalitions, Brexit crises, minority government, Covid, they argue, have all prevented the party pushing a low-tax, low-regulation agenda. 

What's expected will be a gamble but one that Conservative leaders hope will pay off in terms of long-term economic growth. 

Here are some things to look out for.

National Insurance

National Insurance is a tax paid by workers and employers. Under Boris Johnson the amount paid increased by 1.25p for every pound earned in order to fund the NHS and social care. It meant NI was set at 13.25%.

Kwasi Kwarteng has already announced that he will reverse that increase, something promised by Liz Truss in her Conservative party leadership campaign. 

The U.K. Government says it will still spend the amount it was planning to spend on the health service.That should mean extra funding for Wales due to be triggered by the planned increase should also be protected but that hasn’t yet been confirmed.

Stamp Duty

Stamp Duty is a tax paid in England by people buying homes. Here in Wales, homebuyers pay Land Transaction Tax instead, but only on properties costing more than £180,000.

It's been widely reported that the Chancellor will cut stamp duty in England in order to boost the economy by encouraging the housing market.

However it would come just a day after the Bank of England increased interest rates to 2.25%, meaning that mortgages are likely to become more expensive. 

Stamp Duty is likely to be cut in England, but it is unclear whether the Welsh Government will do the same with Land Transaction Tax. Credit: PA

The Welsh Government won't say what it intends to do with Land Transaction Tax, but will wait to see what's announced and what that means for any budget change as a result. You can expect an announcement for Wales within a week or so. 

Investment Zones

It's thought that the UK Government is planning "investment zones" to stimulate business and growth in certain parts of the UK. 

Similar to free ports, the idea would see the zones set up in 40 areas. Taxes for businesses and residents would be lower but so too would environmental and planning standards, in order to speed up investment. 

The trouble for Liz Truss delivering this in Wales is that many parts of that - notably planning and environmental rules - are the responsibility of the Welsh Government. 

A long and drawn out argument about creating the first free port in Wales shows just how difficult it would be for two ideologically opposed governments to work together on something like this. 

Benefits clampdown

The Chancellor is expected to announce a shake up of the welfare system, notably that those working part time and claiming benefits could face seeing payments cut if they don't look for more work.

It's thought the change would affect about 120,000 people working up to 15 hours a week.

Kwasi Kwarteng described the move as: “A win-win. It boosts incomes for families and helps businesses get the domestic workers they need, all while supporting economic growth."

A limit on bankers' bonuses is likely to be lifted. Credit: PA

Bankers' bonuses

It's been reported that the Prime Minister and Chancellor are considering getting rid of limits on bankers' bonuses in order to stimulate economic growth. The cap currently limits annual payouts to twice the salary a banker earns. 

There are said to be other plans to cut regulation in the financial sector. Liz Truss has already defended such plans and said that "some measures will be unpopular."

Wales' wishlist

While we await the details from the Chancellor, there's plenty of advice for him from others.

A Welsh Government spokesperson said we are living in "some of the most challenging economic times we have ever known" with "inflation eroding household and public service budgets and the cost of living crisis impacting every individual, community and business across the country."

The statement continued: “This new UK Government needs to show they genuinely understand the real challenges faced by people, businesses and our public services – and to demonstrate that through bold action in their Fiscal Statement.

“We want to see action taken to target support to people who need help the most, to support public services with inflation driven budgetary pressures, and to invest in a low carbon future to tackle rising energy bills over the long-term.

“We have already made these priorities crystal clear to the Chancellor, and this statement is an opportunity for the UK Government to show it does not have the same misplaced priorities as the old one.”

Plaid Cymru's Treasury spokesperson Ben Lake MP criticised what has been leaked of the plans so far as proving that “Liz Truss and Kwasi Kwarteng seem intent on making the super-rich even richer while everyone else sees the value of their wages decrease and costs rocket."

“The Chancellor needs to reconsider his approach, and stop peddling fantasy ideas that have been completely discredited by the rest of the world. Even President Biden recently stated that he is ‘sick and tired of trickle-down economics – it has never worked.’ There is no evidence that these tax cuts will bring economic growth. What is certain is that future generations will be paying off this Tory debt for decades to come.

“What we should be seeing tomorrow is a much clearer commitment to protecting households and businesses from the current crisis. This calls for expanding the cost-of-living payments and payments for those reliant on heating oil and guaranteeing that they will be extended next year. Furthermore, the Government should establish urgently a hardship fund for small businesses for whom the current support will be insufficient.“It should also be recognised that decades of Westminster Governments have underinvested in Wales. It is time to give Wales the fiscal powers we need to unlock our economic potential, starting with investment in our physical infrastructure and digital connectivity, a street-by-street home insulation programme and a renewables revolution.”Welsh Liberal Democrat leader Jane Dodds has criticised the business energy cap announced this week as a "temporary sticking plaster" which came "too late for the many small businesses that already closed their doors for the last time because they couldn’t afford soaring bills."

And she said that the measures expected in the Chancellor's announcement are likely to increase future problems by adding to the UK's national debt rather than being funded by a "windfall tax on the obscene profits of global oil and gas giants."

She added: “What I want to see and what I believe the Welsh people want to see is not massive tax cuts for the big banks and global corporations like Amazon, who are not struggling and instead real help targeted at families and small businesses paid for by taxing the super profits of energy companies, who right now are making their money off people’s misery.

“I also think it is quite telling that they have blocked OBR (Office for Budget Responsibility) scrutiny of their plans. If you cannot be transparent about your plans for the economy, you shouldn’t be trusted to run it.”