Liz Truss and her chancellor Kwasi Kwarteng were accusing of producing an “trickle down” economic plan helping the “already wealthy” after announcing a raft of tax cuts which benefit the rich the most.
Treasury estimates put the cost of tax cuts announced by chancellor – including the abolition of the top rate of income tax for the highest earners – at nearly £45bn a year in 2026.
High earners getting more than £150,000 a year will no longer pay the top income tax rate of 45 per cent and will instead pay the 40 per cent rate paid by those earning over £50,000.
It means those earning over £150,000 will enjoy an average tax cut worth £10,000 a year, according to Treasury officials. The government loses out on more than £2bn a year from the plans to cut tax for the 629,000 people in the top tax bracket.
Labour’s shadow chancellor Rachel Reeves said the government had “decided to replace levelling up with trickle down” – accusing Ms Truss of subscribing to “an ideology that says if we simply reward those who are already wealthy, the whole of society will benefit”.
SNP leader and Scotland’s first minister Nicola Sturgeon said the super-rich will be “laughing all the way to the actual bank” after the chancellor unveiled his tax-cutting plans – accusing the Tory government of “moral bankruptcy”.
Business groups gave a cautious welcome to the chancellor’s statement. But the markets reacted badly, as the pound fell to a new 37-year low, and unions were scathing – calling it “Robin Hood in reverse”.
TUC general secretary Frances O’Grady said Ms Truss and Mr Kwarteng were “holding down wages and lining the pockets of big corporations and City bankers”, adding: “This budget is Robin Hood in reverse.”
Unite general secretary Sharon Graham said it was “unashamedly a budget for the rich, big business and the City … whilst millions of ordinary families continue to struggle to make ends meet”.
The Joseph Rowntree Foundation said the mini-budget proved the government had “no understanding of the economic reality facing millions” and had “clearly chosen to turn its back on millions who are on the lowest incomes”.
Institute of Fiscal Studies (IFS) said the richest 1 per cent would gain the most from the income tax rate change. “A small amount of people gaining a lot from that measure,” said IFS deputy director Carl Emmerson.
Mr Kwarteng claimed that the changes to the top rate “will simplify the tax system and make Britain more competitive”, and argued his economic vision will “turn the vicious cycle of stagnation into a virtuous cycle of growth”.
However, the government revealed a huge increase of £78bn in additional borrowing for the rest financial year, mostly to pay for the loss in revenue.
The chancellor also estimated that the two-year energy bills bailout, including support for households and businesses, will cost around £60bn over the first six-month period from October.
The major tax-cutting package included a cut to national insurance and corporation tax, VAT-free shopping for overseas visitors and cuts to stamp duty.
The chancellor accelerated a planned 1p cut in the basic rate of income tax – from 20p to 19p – which will now come into force next April, instead of in 2024.
The recent 1.25 per cent rise in national insurance will be reversed in November. April’s planned rise in corporation tax from 19 per cent to 25 per cent will be cancelled, reducing the government’s tax take by £19bn a year by 2026.
The immediate stamp duty cuts mean the exemption level was immediately doubled from £125,000 to £250,000 while the exemption for first-time buyers increased from £300,000 to £425,000.
Paul Johnson, the director of the Institute for Fiscal Studies (IFS) economic think tank, said Mr Kwarteng’s “big gamble” was the “biggest tax-cutting event since 1972”.
“This will I am sure lead to the Bank of England increasing interest rates more than they otherwise would do,” he told BBC News. “This is a big gamble.”
Money saving expert Martin Lewis described the government’s “huge new borrowing” alongside huge tax cuts as “staggering”. He said: “It’s all aimed at growing the economy. I really hope it works. I really worry what happens if it does.”
The cap limiting bankers’ bonuses to 200 per cent of annual salary has been scrapped by chancellor. “We need global banks to create jobs here, invest here and pay taxes here in London, not in Paris, not in Frankfurt, not in New York,” said the chancellor.