Royaume-Uni : un plan pour stimuler la croissance

The economic context

The Chancellor has set a target of 2.5% trend growth in the medium term. The government will soon publish a medium-term strategy for public finances, which will include a reduction in debt as a percentage of GDP. The Office for Budgetary Responsibility (OBR) will publish a macroeconomic framework by the end of the year and another one next year.

The main announcements

Energy costs

The Growth Plan implements the measures that have been announced in recent days to protect households and businesses from rising energy prices:

• for households, a cap on annual energy bills of £2,500 for a typical household for two years from ^1st of October (‘Energy Price Guarantee’), an average government-funded rebate of £1,000. This will be in addition to the £400 reduction in energy bills that had been announced. More informations: https://www.gov.uk/government/news/government-announces-energy-price-guarantee-for-families-and-businesses-while-urgently-taking-action-to-reform-broken-energy-market
• for companies, but also associations and the public sector (schools, hospitals), a reduction in the wholesale price of gas and electricity (“Energy Bill Relief Scheme”). This discount will be available for six months, between 1^st of October 2022 and 31th of March 2023. It will apply to fixed price contracts signed since 1^st ofApril, to new fixed price contracts, to variable price contracts but also to energy purchases outside contracts. The support will be equivalent to that provided to households. More informations: https://www.gov.uk/guidance/energy-bill-relief-scheme-help-for-businesses-and-other-non-domestic-customers
• Energy Markets Financing Scheme: the Bank of England will guarantee 100% of commercial banks’ emergency cash loans to energy brokers.

The cost of this energy package for the period October-March is around £60 billion. The government estimates that these measures will reduce the inflation rate by about 5 percentage points.

Tax cuts and system simplification

• Cancellation of the corporate tax increase planned by the previous government. The corporate tax rate, which should have risen to 25% next year, will remain at 19%, the lowest among G20 countries.
• The £1m business investment tax credit will be made permanent from April 2023 when it was due to revert to £200,000 (‘Annual Investment Allowance’)
• Growth businesses will be able to raise up to £250,000 under the Seed Enterprise Investment Scheme, a 66% increase in the funding limit
• Companies will be able to offer stock options to their employees up to £60,000 instead of £30,000 (“Company Share Option Plan”)
• Cancellation of the planned increase in social security contributions for businesses, representing an average saving of £10,000 for over 900,000 businesses
• Baisse des cotisations sociales pour les ménages
• Cutting the basic rate of income tax from 20% to 19% from April 2023, an average annual gain of £170 for 31 million taxpayers
• Abolition of the additional 45% income tax rate to attract talent. The maximum income tax rate is therefore 40%.
• Lowering the tax on property transactions so that 200,000 people buying their home each year will no longer pay this tax
• Freeze of the tax on alcoholic beverages from February 2023
• Creation of a digital zero-VAT purchase system for foreign tourists

In total, tax cuts will amount to £45 billion by 2026-27. Simplifying our tax system will be a central priority.

High quality infrastructure

• The government will introduce legislation to implement new regulations for building permits and simplify environmental regulations for major infrastructure projects. Over 100 projects have already been identified. It will now be easier to build roads, railways and energy infrastructure such as offshore wind farms.

Increasing private investment

• Creation of deregulated investment zones with attractive tax treatment to stimulate growth and property development
• Abolition of limits on bankers’ bonuses. As the Chancellor said: “A strong British economy has always been underpinned by a strong financial sector”. Thus, the government wants to make bonuses more incentive for employees by linking them more closely to the bank’s performance. Thus, the government wants to make bonuses more incentive for employees by linking them more closely to the bank’s performance.

• Acceleration of ceiling reforms on pension levies
• Incentives for investment in science and technology companies (“scale-ups”) with £500 million to support new innovation funds.

Labour market

The Chancellor also announced a tightening of the conditions for access to the Universal Credit. Beneficiaries of this allowance working less than 15 hours a week will have to have regular interviews with their work advisor and take active steps to increase their earnings or risk having their social benefits reduced. The aim is to bring an additional 120,000 jobseekers into active search. The effort will also focus on jobseekers over 50 who will receive additional support. The government estimates that a return of the employment rate of the over-50s to its pre-pandemic level could increase growth by 0.5 to 1 percentage point. This measure comes against a background of tension on the labour market with an unemployment rate of 3.6%.

Source : UK government, https://www.gov.uk/government/publications/the-growth-plan-2022-documents