Shoosmiths experts react to the mini-budget

September, 2022 - Milton Keynes, England

The new chancellor has today revealed a ‘new era of growth’ after unveiling the contents of the mini-budget. Our financial services, corporate, tax pensions and real estate experts give their views on the measures announced, below.

Stephen Dawson, partner and head of Shoosmiths’ financial services sector, said:

“Described as a mini-budget, this announcement on tax cuts and regulatory reform is fixed on turning the UK economy from stagnation into growth. Measures include tax cuts, the reversal of the 1.5% rise in national insurance, the scrapping of the bankers bonus cap to ‘stimulate competition and investment and maintaining corporation tax at 19%. Many, we suggest, will see a material benefit – from corporates to consumers.

“But are these cuts and reversals in vain? The UK has big budget and trade deficits and has seen a decline in wages in real terms. Only yesterday The Bank of England (BoE) pushed up interest rates by 0.5% to 2.25%, the largest shift in 14 years. We are warned of further rises, potentially above 0.5%. This pushes the cost of consumer debt upwards relentlessly.

“Not everyone agrees that the scale of government borrowing required to fund these measures is money well spent. It will leave the UK paying off the debt for a much longer period of time. Others are calling for big industry to pay up, including the energy companies who have fared well out of the recent massive hikes in energy costs.

“While there is an early view that the price cap measure on energy bills will help to take some heat out of the rate of inflation, only yesterday The Bank of England (BoE) pushed up interest rates by 0.5% to 2.25%, the largest shift in 14 years. We are told we may already be in a technical recession. Inflation is here to stay for a while at least.

“At this stage, the economic balance remains supporting business for growth, giving consumers a realistic hope of some financial stability and allowing the economy to move out of recession. An unenviable task, particularly when views differ sharply on how to achieve that in the middle of globally uncertain times.”

Elia Montorio, corporate partner, said:

"It's an interesting move - to try to stimulate growth by reducing taxes in quite a radical way and removing limits on bankers bonuses, when, conversely, the Bank of England is trying to dampen inflation with interest rate hikes. 

“While we have had huge levels of activity for M&A, investment, private equity, venture capital over the past few years, businesses and individuals desperately need the fuel subsidies to take them through the winter period. This is a temporary measure of course, with most of the policies ending over a course of months.

“I still think business activity will continue but more in the consolidation space. I believe that in the current macro-economic climate there will be an appetite for consolidation with a focus on quality and established business models. The renewables and energy sector as an example is one that will have a large number of players seeking to align with sustainable growth engines that represent a path to energy security."

Tom Wilde, partner and head of enterprise investment scheme (EIS) and venture capital trusts (VCT) tax, said:

“As expected, the Chancellor has gone ‘all in’ on tax cuts and incentives being the path to economic growth and the way out of the likely recession. It’s hard to remember a Budget (whether this was one or not!) where such a swathe of tax cuts, the cancellation of previously announced increases, and increased incentives to invest were introduced in one go.

“The devil will be in the detail to see what trade-offs are required by the government for such a package of measures (there was a worrying statement about those on benefits being required to do more to obtain work or face benefit cuts), but particularly eye catching are the creation of new investment zones with a wide range of tax incentives, the cancellation of the proposed corporation tax rate rise, the abolition of the 45% income tax rate, the reduction in the basic rate of income tax, and the increased zero-rate of SDLT.

“Another extremely welcome piece of certainty was that both the EIS and VCT schemes will be extended beyond April 2025 although previous comments from government ministers suggested that there may be some changes to the schemes at the same time.

“The million (or should that be multi-billion) pound question is how we will pay for this and what impact huge additional borrowing by the government will have on our economic future, particularly those of our children and our grandchildren.

“There’s no doubt that this is a massive economic gamble by a new chancellor and prime minister who clearly want to make their mark and distance themselves from the previous administration but whether they ‘beat the house’ or lose everything remains to be seen with the result not being known for many years.”

Stuart Tym, planning partner, comments:

“The proposed local investment zones can be seen as hyper-freeports, eclipsing those announced by the previous administration in terms of deregulation. This is particularly the case for planning policy, with the zones subject to bespoke regulations and potentially scaling back environmental protections, Section 106 agreements and infrastructure levies.

“Changing planning policy can act as a lever for development. However, it’s critical that we avoid becoming tunnel-visioned in the pursuit of economic growth; ensuring that deregulation does not impact the environment and balances the delivery of much-needed market rate and affordable housing with the related required infrastructure.

“Government funding will be used to fill the void left by reducing developer contributions in these zones. The success of this system hinges on often under-resourced local planning authorities being not only able to demonstrate what they would have asked a developer to finance, but also obtain funding from a new government stream and deliver projects in a timely fashion to mitigate the impact of development.

“The confirmation that a bill is set to be brought forward to ‘unpick’ the wider planning system may signal the end of the Levelling Up and Regeneration Bill and its planning proposals. The Chesham and Amersham by-election result may have made that approach to de-regulation unpalatable; which remains the political lens through which further reform must be viewed.

“If the government is to accelerate further planning reform by ‘unleashing the power of the private sector’ it must also empower the public sector by properly resourcing local planning authorities.”

Charlie Rae, employment partner, added:

“With the news that people in receipt of certain benefits may need to take steps to increase their earnings or face benefit reductions if commitments aren't met, businesses may see requests from part-time staff asking to increase their hours or to move to full-time contracts.

“Businesses faced with those requests will need to ensure they deal with them consistently and fairly, particularly as the request might fall within the scope of the statutory rules whereby employees can make a request for flexible working.

“While employers won’t be legally forced to agree to requests in increase hours or convert to full time contracts, they will need to ensure they deal with any requests carefully to avoid potential employment liabilities arising.”

Paul Carney, pensions partner, said:  

“The chancellor has announced that performance fees will be removed from the charge cap which is applied to money purchase (or defined contribution (DC)) pension schemes and arrangements.  The objective, as I understand it, is to encourage (if that’s the right term) pension schemes to invest in (UK) science and technology.   This is all connected, it seems, to concerns with the UK’s stagnant economy and the Bank of England’s warning that the country may already be in a recession. 

“At present, fees payable in relation to DC schemes such as auto-enrolment pension schemes are capped.  The cap is expressed as a percentage of the value of an individual’s pension fund.  The government’s idea is to disapply that cap under certain circumstances or, to use the chancellor’s words, to reform the pension charge cap so that “it will no longer apply to well-designed performance fees”.  The government has not, as far as I know, defined “well-designed performance fees” or (even) “well-designed”.

“I am aware that the government has, of late, put pension schemes in the general sense under pressure to invest in UK assets and the reform is consistent with this behaviour.  It seems to be intended to provide new sources of capital for (UK) investment.  The change is, in my view, unlikely to make much (if any) difference.  Pension scheme managers and trustees are under an obligation to invest pension scheme funds with the best interests of scheme beneficiaries in mind.  In taking investment decisions, they are required to take appropriate investment advice.  If that advice is that the best returns are to be made outside the UK, it is difficult to see how a manager or trustee could properly ignore that advice and take the consequent risks.  I don’t believe I am alone in my scepticism.  Pensions specialists have been expressing concern all this year about the government’s proposal to exclude performance fees and I know that Mr Darren Philp (MD at Shula PR and Policy) does not believe this particular reform will make any meaningful difference.

“I am also confident that the government has not included, within its encouragements, tangible protection for those pension arrangements which followed the government’s guidance and, in following it, ended up losing pension scheme members’ money.  The managers/ trustees of those arrangements would be in a difficult position – particularly if a failed investment had been made against advice.”

Catherine Williams, partner and head of living, said:


“Today’s changes to the Stamp Duty Land Tax will increase demand and not deal with residential supply.


“While creating an uptick in activity, these concessions are unlikely to ease the pressures the UK housing market currently faces. This risks creating another mini-boom and furthering the lack of affordability loop.”