Mini Budget 2022 preview: energy bills, National Insurance, Marriage Allowance & more

A range of tax cuts are expected from the new Chancellor in Friday’s fiscal event.

The new Chancellor, Kwasi Kwarteng, is set to announce a host of tax cuts in his first appearance at the despatch box this week.

The fiscal event, often referred to as a mini Budget, is to be held on Friday and will likely include a range of changes to the tax system as promised by Liz Truss during her campaign for the leadership over the summer.

So what will those announcements mean for your money?

What is a ‘fiscal event’?

Before we get into what’s likely to be in the speech, it’s important to outline what a fiscal event even is and why we aren’t getting a formal Budget.

Ordinarily, we would expect to see a proper Budget from a new administration, but these are accompanied by formal forecasts from the Office for Budget Responsibility based on the plans outlined.

However, according to Truss and her team when she was running for the leadership, producing such forecasts would have meant delaying the ‘fiscal event’.

It’s an approach that's been criticised by the Treasury Select Committee, which warned that fiscal announcements at the moment without independent forecasting was effectively “flying blind”.

Energy price guarantee scheme

One of the first things that Truss did when taking office announced the energy price guarantee scheme, a measure aimed at limiting some of the pain of rising energy costs.

Under the scheme, the unit cost of gas and electricity are fixed, meaning that the typical household will spend around £2,500.

It’s important to bear in mind that this isn’t a cap  ‒ if you use more energy than the typical household, then you will pay more.

However, when the scheme was announced, the Government didn’t actually set out precisely how it would be paid for, nor how much it will cost overall.

It’s expected that Kwarteng will clear up some of those elements during his speech.

National Insurance

One of the cornerstones of Liz Truss’s campaign for the leadership of the Conservative Party was her promise to reverse this year’s National Insurance increase.

Last year, the Government announced plans to increase National Insurance for everyone by 1.25%, a move that was aimed at raising funds for the NHS and social care.

As we wrote at the time, National Insurance is a bit of a blunt and unfair way of doing so.

As a result, by the time of the Spring Statement earlier this year, the plans were already being rejigged, thanks to an increase in the threshold at which point we start paying National Insurance. 

Truss has pledged previously to scrap the increase entirely, while keeping that higher threshold, so expect to hear something about precisely when that change is likely to occur from the new Chancellor.

Marriage Allowance

At the moment, some couples are able to share a portion of their personal allowance.

That’s the amount that you can earn before paying Income Tax, and currently stands at £12,500.

The Marriage Allowance means that one partner who earns less than that figure can pass 10% of the allowance ‒ so £1,250 ‒ to their higher earning partner.

They can only do so if the higher-earning partner still only pays the basic rate of Income Tax, however.

During the leadership campaign, Truss said she wanted to expand the Marriage Allowance so that partners could pass on all of their unused Personal Allowance.

A focus on growth

Kwasi Kwarteng has only been in charge of the Treasury for a short period, yet it’s becoming clear that his big ambition for the department is a focus on growth.

There have been plenty of leaks around the idea that Kwarteng is to set out a 2.5% target for economic growth, so it’s likely that much of the statement will outline measures designed to assist in hitting that target.

Reports have suggested that this could include the establishment of special ‘investment zones’ which will be subject to low taxes and low regulation, in a bid to encourage businesses to set up there.

The idea has been floated that it won’t just be the businesses themselves that are subject to lower taxes, but potentially the people that live and work there too.

There has been speculation that the Chancellor will remove the fiscal rules currently in place ‒ set up by previous incumbents ‒ that require national debt to be falling within the next couple of years.

Instead, the idea is that debt may go up, through additional borrowing, in order to fund the various tax cuts on offer.

The triple lock

The State Pension triple lock has been increasingly controversial in recent years.

The triple lock ensures that each year, the income of pensioners is increased by the largest out of the rate of inflation, rate of wage growth, or 2.5%.

However, it was suspended last year, removing the wage element because of the rapid growth seen in average earnings following the end of furlough and recovery from the pandemic.

This means that the state pension increased by 3.1% (the rate of inflation) rather than the 7% it would have increased by thanks to earnings growth.

Liz Truss has previously stated her support for the triple lock, so we should have confirmation of whether it will still be in place for next year in the fiscal event.

And this is particularly notable given that the increase next year will be driven by inflation, which is now at a whopping 9.9%.