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Mini-budget: Fintechs concerned about delay to energy bills support and tax breaks for high-earners

The new Chancellor Kwasi Kwarteng is to unveil a mini-budget on Friday and we asked fintech leaders what policy announcements they would like to see.

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Kwasi Kwarteng/The Treasury/Flickr.

The new Chancellor Kwasi Kwarteng is set to unveil a mini-budget this Friday—as the government looks to boost economic growth and alleviate the cost of living crisis.

While not a full-blown budget, the Chancellor is set to announce £30bn in tax cuts reportedly including reversing the recent national insurance rise, freezing corporation tax, and scrapping green levies.

He is also expected to ditch caps on bankers’ bonuses in a mini-budget focused on growth and tax cuts.

Energy bills

The government has already announced a £150bn energy price cap, but fintechs will be concerned that they will likely have to wait longer than households for financial support with their energy bills amid delays in launching the £150bn scheme.

Financial services firms are concerned about the prospect of delays in financial support as fixed energy contracts come to an end in October for hundreds of thousands of firms.

The boss of one fintech said help needs to come in sooner rather than later.

Amon Ghaiumy, CEO and co-founder, Ophelos, a debt resolution fintech, said: “It’s evident that energy prices aren't just impacting households, but will also be devastating for small businesses if no changes are made this week.

"The government has already alluded to energy bill support for small businesses, however, this needs to come into place sooner than later or I fear we may see smaller firms struggling to stay above water as energy prices go up."

Josh Levy, CEO of Ultimate Finance, pointed to figures showing a dramatic rise in insolvencies across England and Wales in August this year compared to last year, increasing by 43 per cent to 1,933 while there were more corporate insolvencies in the first eight months of this year than the whole of 2021 and 2020.

Levy said: "This is the context in which the Chancellor is looking to build on the recent energy cap announcement, of which details are urgently sought with justifiable concerns about the ability to implement something for businesses that match the depth and simplicity of the household energy price guarantee."

Tax cuts

On tax cuts, Ghaiumy said: "From what we've seen so far, tax breaks are set to mostly benefit higher-earners across the country. With the cost of living still at a 40-year high, at Ophelos we'd like to see households that are struggling the most to also be supported by any potential policy changes. 

“A change that might provide some support for these households would be to raise the threshold for tax-free allowance to ensure that benefits are gained from the bottom-up, and not just top-down. 

"On top of this, we'd like to see more targeted support funds, and benefits—such as the household support fund or cost of living payment - to help those that may become financially vulnerable and face problem debt in the coming year.”

On tax cuts, Levy added: "Having economic growth as a priority is correct but focusing on corporation tax and other such measures are unlikely to be the way to do this. It’s the cost of doing business that is going up and with margins and the viability of profits an issue, the corporation tax rate on profits that are rapidly deteriorating is going to be of little comfort to most businesses.

"We believe that support is absolutely required as we head into difficult winter trading conditions but it should be more targeted with business rates relief for appropriate sectors and urgency given to tackling the contributors to input cost inflation and relieving energy supply pressures. The scale of the challenges facing businesses and the government is significant, and any intervention needs to be proportionate to this."

Other policies fintechs want to see

Outside of the headline policies, fintechs are hoping for other policy announcements (either in the budget or in future) to help boost SMEs and to render crypto more mainstream.

Nick Lee, head of regulatory and government affairs at OakNorth Bank, said: “Currently, the burden of regulation falls more heavily on challenger banks than on larger, systemic institutions. 

“That is generally evidenced by higher capital requirements per pound of risk exposure, particularly for those banks on the standardised approach to capital. However, in contrast, most other requirements (for example, regulatory reporting) seem to apply regardless of the size and complexity of the institution. 

“The systemic profile of the bank appears to make little difference to regulatory requirements and requests. With an ever-broadening scope of regulatory requests and requirements, it seems counterintuitive to competition to disregard the size, status, and systemic status of a bank.

“One of the recommendations from the Kalifa Review of UK fintech published 18 months ago was that regulation needs to be ‘right-sized according to the nature of the business in question and the specific risks it presents.

“In other words, smaller, newer players in the banking sector, shouldn’t have to adhere to the same regulatory reporting and capital requirements as large, systemic institutions.”

On crypto

Blockchain firm Aventus is hoping the chancellor will bring in “proper” regulatory oversight across crypto to help protect customers.

Alan Vey, founder and chairman of Aventus, said: “The increasing value that resides in the digital domain calls for proper regulatory methods to protect consumers—the longer this goes unaddressed the greater the risk everyday users face.

“We hope to see this addressed on Friday to gain more clarity and reassure industry players, fueling both trust and further innovation in the space.

“The government and regulators must ensure they are keeping up with this fast-growing and highly complex industry sooner rather than later, and it’s crucial that recent political changes don’t hamper its momentum. 

“This is especially true given the fact that Rishi Sunak proposed a raft of changes earlier this year, including removing tax barriers, and developing a non-fungible token (NFT)with the Royal Mint. 

“Happily, authorities are quickly beginning to catch up to the fact that crypto is beginning to play a role in shaping global financial systems and flows of capital in a significant way, it’s not going anywhere.”

With Kwarteng due to announce his mini-budget on Friday 23 September at around noon, we'll find out what the new Chancellor has in store soon enough.

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Nick Lee

Head of Regulatory and Government Affairs

OakNorth Bank

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