Britain's Chancellor of the Exchequer Kwasi Kwarteng unveiled the new government's flagship go-for-growth agenda on Friday, betting on lower taxes and deregulation to lift the country out of a "vicious cycle of stagnation".
Declaring a "new era" of business-friendly policies with a series of tax-cutting announcements, Mr Kwarteng abolished the 45 per cent top rate of income tax, while the basic rate will be lowered by 1p to 19 per cent.
A recent increase in National Insurance will be reversed from November 6, Mr Kwarteng said, fulfilling a central pledge of Prime Minister Liz Truss's successful leadership campaign.
A planned rise in corporation tax, and a health and social care levy that was due to come in next April to pay for the costs of the coronavirus pandemic will also be scrapped.
And in one of the most controversial measures, a cap on bankers' bonuses will be lifted in the hope of boosting London's powerful financial sector.
"We need global banks to create jobs here, invest here and pay taxes here in London — not in Paris, not in Frankfurt and not in New York," Mr Kwarteng said.
"We are securing our place in a fiercely competitive global economy, with lower rates of corporation tax and lower rates of personal tax."
The pound slid on currency markets before and during Mr Kwarteng's statement, amid doubts over whether the government's plan was affordable and fears it could further stoke inflation. Sterling was at $1.115, a 37-year low.
The opposition Labour Party said Mr Kwarteng's statement represented an "admission of 12 years of economic failure" under Conservative-led governments.
In other announcements:
· Mr Kwarteng set a target of 2.5 per cent annual growth in the medium term
· More homes will be exempt from stamp duty in a bid to stimulate the housing market, with an estimated 200,000 people escaping the land tax
· Tourists from abroad will enjoy VAT-free shopping in Britain, Mr Kwarteng said
· Businesses will be granted 10 years of tax relief in designated investment zones, with early discussions focusing on 40 areas in England
· A bill will be brought forward to loosen planning restrictions, with key infrastructure projects to be given priority
· More conditions will be attached to unemployment benefits to encourage people to seek work
· Unions will be required to put pay offers to their membership to discourage strikes
· All regulations inherited from the European Union will be phased out by the end of next year in a drive to simplify tax codes
The mini-budget announced to MPs on Friday confirmed already announced measures to cut energy bills by a typical £1,400 ($1,560) per year, as high prices and fears of recession hang over the British economy.
Energy prices will be capped for two years after the fallout from Russia's invasion of Ukraine led to a gas squeeze across Europe. A financing scheme will be set up to support businesses.
Runaway fuel prices "create real risks to energy firms who are otherwise viable businesses", Mr Kwarteng said.
He said the energy bailout was estimated to cost £60 billion ($67bn) over six months, funded by borrowing rather than a windfall tax on energy companies as the opposition has demanded.
"The oil and gas producers will be toasting the chancellor in the boardrooms as we speak, while working people are left to pick up the bill," said Labour's shadow chancellor Rachel Reeves.
Ministers expect the cost to come down as they negotiate new long-term energy contracts with suppliers, Mr Kwarteng said.
The cancellation of the National Insurance rise, which Ms Truss supported at the time but now says she privately opposed, is forecast to save people an average £330 ($370) per year.
Mr Kwarteng said the new government's economic vision would “turn the vicious cycle of stagnation into a virtuous cycle of growth”.
"We need a new approach for a new era, focused on growth," he said. "Growth means better jobs, higher wages and also more tax revenue to pay for our public services so that we can protect the most vulnerable in society."
There was concern that Britain’s fiscal and monetary policies appeared to be out of step, with the Bank of England tightening purse strings through higher interest rates while ministers loosen them with lower taxes.
“It is quite unusual and furthermore it is really quite worrying that we’ve got two arms of the government’s economic policy which are pulling in opposite directions,” former Treasury adviser Lord Burns told LBC radio.
Mr Kwarteng told MPs that he spoke to the BoE's governor twice a week. The BoE on Thursday raised its benchmark interest rate to 2.25 per cent, the highest level set since November 2008.