The Prime Minister, Liz Truss delivered a hastily arranged press conference on Friday 14 October. At the press conference, the Prime Minister confirmed that she had sacked the Chancellor, Kwasi Kwarteng after less than six weeks in office. This was done in order to try and deal with the market and political turmoil that had increased significantly following the Growth Plan, commonly referred to as the mini-budget, on 23 September.
The Prime Minister also used the press conference to confirm that the planned increase in Corporation Tax that was set to come into effect in April 2023 will now go ahead. This move represents a second major U-turn by the government following the mini-budget. The first U-turn being the announcement to scrap the proposed removal of the 45p tax rate from April 2023.
The Corporation Tax main rate will now increase from 19% to 25% on 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will apply for companies with profits of up to £50,000. There will also be a marginal rate of Corporation Tax for companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm makes.
The Prime Minister accepted that elements of September’s Growth Plan went further and faster than markets were expecting. However, there was no sign of an apology for the recent economic crisis and her position is appearing increasingly untenable.
It was also confirmed that the Prime Minister has appointed Jeremy Hunt as the new Chancellor of the Exchequer and he becomes the fourth person to hold the position this year. Mr Hunt has held a number of Cabinet positions in the past including foreign minister and health secretary and was a previous leadership contender.
The new Chancellor will deliver the Medium-Term Fiscal Plan on 31 October, detailing action to get debt falling as a percentage of GDP over the medium term. The Corporation Tax increase is expected to raise around £18 billion a year although it remains to be seen if there will be further tax increases and spending cuts.