Corporation Tax cut reversal announced the previous Friday

Jeremy Hunt, in his fourth day as Chancellor, announced a reversal of around 60 per cent of the tax measures set out in Kwasi Kwarteng's mini-Budget of 23 September, according to the Resolution Foundation¹. The reversal of the £19 billion cut to Corporation Tax had been announced the previous Friday¹. The Resolution Foundation put the total value of tax-cut reversals announced since the mini-Budget at £32.3 billion¹.

Alongside the Corporation Tax reversal, the government said it would no longer repeal reforms to IR35 off-payroll working rules, worth around £2 billion a year; introduce a VAT-free shopping scheme for tourists, worth £2 billion; cut dividend tax by 1.25 percentage points from April 2023, worth around £1 billion; or freeze alcohol duties from 1 February 2023, worth £600 million¹. The Chancellor also scrapped the 1p cut to the basic rate of Income Tax first announced by Rishi Sunak, which the Resolution Foundation said saves almost £6 billion a year¹.

The Resolution Foundation said the £32.3 billion of reversals would, on its own, be the largest tax-raising fiscal announcement since 1993, narrowly beating Rishi Sunak's Spring Budget 2021, which contained around £29 billion a year of tax increases¹. It said the U-turns since 23 September had reduced the size of the personal tax cut next year for a typical household from £500 to £290, and for the richest 10 per cent of households from £5,380 to £1,650¹.

Source: Resolution Foundation¹

The Resolution Foundation also said the Energy Price Guarantee would now end next April, 18 months earlier than originally planned, which it said could save the Treasury up to £40 billion next year, at the price of allowing typical annual bills to rise to £4,000 next April¹. It said the freezing of the Income Tax Personal Allowance for four years, first announced in March 2021, would now cost the typical household over four times more than the £320 per year originally estimated, at £1,420¹.

Why it matters for households

The Resolution Foundation said the typical household in 2025-26 would see its income fall by £1,000 as a result of personal tax and benefit changes announced during this parliament, compared with £780 at the time of the mini-Budget¹. The richest 5 per cent of households would see an average income loss of £4,330, compared with gains of £2,520 after the mini-Budget¹. It said taxes as a share of GDP were on course to rise to around 36 per cent by the end of the parliament, up from 33 per cent at the start, which it said would be the highest sustained level since 1950-51¹.

On energy, the Resolution Foundation said ending the Energy Price Guarantee next April would allow typical annual bills to rise to £4,000, on the basis of current wholesale gas prices and the Ofgem price cap returning to effect¹. It said this would be in stark contrast to historical levels of household expenditure and entirely unaffordable for millions of households, especially those on low incomes and with high energy use¹. It said significant pressure had been placed on the announced Treasury review to come up with a more targeted and cheaper successor for the guarantee¹.

What happens next

The government's medium-term fiscal plans are due to be laid out on 31 October¹. The Resolution Foundation said the Chancellor remained on track to announce public spending cuts in the order of tens of billions of pounds at that point, and that cuts of that scale were likely to be needed if the government is to meet its stated aim of having debt falling as a share of GDP in the medium term¹. It said the Treasury review of energy support would need to produce a successor to the Energy Price Guarantee¹.