What does Chancellor Kwasi Kwarteng’s mini budget mean for Birmingham and the West Midlands?

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The West Midlands is a key target area for Conservatives looking to hold their ‘red wall’ seats, with West Bromwich East, West Bromwich West, and Northfield, under threat from the Labour party - but will the mini budget benefit the region?

Chancellor Kwasi Kwarteng says his mini budget will provide the “biggest package in generations” of tax cuts to send a clear signal that economic growth is the government’s priority.

And in an announcement likely to be seen as a re-election gamble, Mr Kwarteng has given the most generous tax cuts in 50 years, with national insurance slashed and the top 45p income tax rate on earnings of more than £150,000 scrapped.

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The West Midlands is a key target area for Conservatives looking to hold their ‘red wall’ seats, with West Bromwich East, West Bromwich West, and Northfield, under threat from the Labour Party. While the party have enjoyed a significant lead on cost-of-living issues, the Conservatives are still seen best at running the economy.

But what does the budget mean for the West Midlands? Birmingham in particular continues to be hard hit by the cost of living crisis, with 156,688 people claiming Universal Credit in the city in June, and areas such as Ladywood and Hodge Hill, experiencing unemployment above pre-Covid levels.

Find out what the budget means for you below:

National Insurance

National Insurance is set to be scrapped in November by the government. It was only introduced as an extra tax measure by Rishi Sunak in April this year, signalling a decisive break from the Johnson-era of tackling inequality.

The new move, which takes effect from November 6, will put only £14 a month on average in the pocket of a basic-rate taxpayer, according to the government – but will not provide any extra assistance for those on the lowest incomes.

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The government announced the 1.25% rise in national insurance contributions in September last year, calling it a ‘health and social care levy’ to fund the NHS and social care on the back of the pandemic.

Ministers pushed up the main rates from 12% to 13.25%, while employers were told to pay 15.05%, taking effect from 6 April. The change will bring a saving of £93 a year for someone earning £20,000, £343 for someone on £40,000, £593 for earnings of £60,000, and £1,093 for £100,000, according to analysts.

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Bankers’ bonuses

Mr Kwarteng confirms the bankers’ bonus cap will be scrapped, to “reaffirm” the UK’s status as a leading financial centre, and to attract more talent to the City of London. Bonuses were failing to drive competition, he argued, and all it did was push up basic salaries of bankers or drive them outside to other financial hubs such as Frankfurt or Paris.

It is part of what he calls “Big Bang 2.0”, a post-Brexit deregulation drive to make the City more competitive, according to the Financial Times, given the difficulties that the UK’s exit from the EU has created for the City.

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But questions will be raised from Conservative colleagues especially in seats like West Bromwich East and Northfield, whose constituents may wonder why they held their breath to vote Conservative while expecting pay restraints on nurses, teachers and police officers to combat inflation.

Thankfully, this may draw less outrage than expected, given the news of bankers’ bonuses already leaked to much scepticism.

Stamp duty

Stamp duty will be cut for property buyers in England and Northern Ireland, effective from today.

In the current system, there is no stamp duty to pay on the first £125,000 of a property’s value. It will be doubled to £250,000. The threshold for first-time buyers will rise from £300,000 to £425,000.

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The maximum property value for first-time buyers’ relief will rise from £500,000 to £625,000.

Chancellor of the Exchequer Kwasi Karteng arriving in Downing Street, London, for the first Cabinet meeting with new Prime Minister Liz Truss. Picture: Victoria Jones/PA WireChancellor of the Exchequer Kwasi Karteng arriving in Downing Street, London, for the first Cabinet meeting with new Prime Minister Liz Truss. Picture: Victoria Jones/PA Wire
Chancellor of the Exchequer Kwasi Karteng arriving in Downing Street, London, for the first Cabinet meeting with new Prime Minister Liz Truss. Picture: Victoria Jones/PA Wire

Investment zones

It’s levelling-up but with new ribbons and a new shiny exterior, according to Conservative insiders, who are praising investment zones as a way to stimulate growth in local regions. What are they?

They’re areas where planning laws can be relaxed, stamp duty abolished, and companies given the green light to ‘write off’ investments in heavy industry as part of the plans. Areas rumoured to be transformed into investment zones include the HS2 interchange site near Birmingham Airport and the NEC; sites in the Black Country; and the site of the proposed gigafactory at Coventry Airport.

Talks of including the Walsall to Wolverhampton corridor as an investment zone have been mooted, which if successful, may leave other local authorities such as Sandwell out the picture.

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Andy Street, Mayor of the West Midlands, heralded the news as a “clear commitment” to local growth, adding the region was at the “front of the queue for investment”. He said it would result in local residents and businesses benefiting from “lower taxes, faster development and improved economic prospects in the weeks, months and years ahead”.

But digging into the detail raises several questions. Critics argue the zones may remove necessary planning regulations, such as height limits, and may scrap requirements for affordable housing altogether.

The last time a similar scheme was introduced under David Cameron – called Enterprise Zones – only 17,500 jobs were created – well short of the 54,000 target created by Treasury mandolins a decade ago. Critically, a report published today by the West Midlands Combined Authority (WMCA) noted manufacturing was down from 51.1% to 50.3% indicating stagnation.

Chamberlain Square, BirminghamChamberlain Square, Birmingham
Chamberlain Square, Birmingham | Madrugada Verde - stock.adobe.co

Trains, trains, trains

Mr Kwarteng says the government will bring forward measures to streamline regulations and “prioritise for acceleration” key infrastructure projects. Three new train stations in Aldridge, Darlaston and Willenhall will be accelerated for development as part of a £54 million infrastructure programme – something Aldridge-Brownhills MP turned chief whip Wendy Morton will be pleased about.

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The A38 Bromsgrove Route will see enhancements along with the M54 and M6 link. A safer road scheme on the A4030 Smethwick will see improvements along with the new metro link between Brierley Hill and Wednesbury.

Transport infrastructure will also be delivered in the Birmingham to Solihull corridor. All of these schemes are not new announcements, but they signal the Conservatives commitment to the region, perhaps due to a certain general election possibly on the cards.

Part-time workers

People on Universal Credit working the equivalent of 12 hours or less are expected to meet regularly with a work coach and take “active steps” to boost their pay. The new rule will require benefit claimants working up to 15 hours a week to take new steps to increase their earnings or face having their benefits reduced.

A large proportion of Birmingham workers are not actively looking for work, according to a report discussed by Birmingham city council this week. Approximately, employment rate for Pakistani heritage women in Birmingham is 35% compared to75% for all UK adults.

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The council believe there is a huge ‘under-claim’ of individuals taking on benefits, meaning some support is not getting to Brummies. Birmingham councillor John Cotton has labelled the Government’s mini-budget ‘a slap in the face for struggling people in Birmingham‘, insisting the measures announced will do very little to support city households facing a cost of living crisis this winter.

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