Kwasi Kwarteng's mini-budget could cost £25billion - almost half of the Government forecast - economic think tank suggests

•  Hostile reaction to Chancellor's plan has caused turmoil in financial markets 
•  Centre for Economics and Business Research suggests deficit will be £25billion
•  Analysis believes tax cuts will stimulate economic growth more than anticipated

Kwasi Kwarteng’s mini Budget will add far less to the country’s deficit than his critics suggest, according to a leading think tank. 

A hostile reaction to the Chancellor’s ambitious £45billion plan to cut taxes and boost economic growth has caused turmoil in financial markets. 

But analysis by the Centre for Economics and Business Research (CEBR) suggests the real cost could be just £25billion – almost half the Government’s forecasts. 

Abolishing the 45 per cent tax band for the highest earners, reintroducing VAT relief for international visitors – known as the ‘tourist shopping tax’ – and scrapping the planned corporation tax rise will stimulate economic growth and lift revenues more than anticipated, the think tank said. 

Top earners in Scotland – where the highest rate of income tax will remain at 46 per cent – may be tempted to move south of the border after the Chancellor slashed the higher rate of tax, it added. 

The number of highly paid individuals attracted to England from other countries could mean the measure is ‘at least self-financing’ compared with the Treasury’s forecasts indicating a £2billion loss. 

Mr Kwarteng’s decision to not have his numbers checked by the Office for Budget Responsibility (OBR) before they were announced spooked investors and caused havoc in currency and bond markets. 

In another blow this weekend, Standard and Poor’s cut its outlook for the UK Government’s debt to ‘negative’ from ‘stable’ as the ratings agency claimed Mr Kwarteng’s unfunded package would cause debt to keep rising. 

The agency said there were now ‘additional risks’ in lending to Britain. 

The CEBR said the Chancellor’s presentation ‘played badly’ in fin­ancial markets and opinion polls, but its calculations show the package ‘looks much closer to fiscal responsibility than the markets presume’. 

Douglas McWilliams, deputy chairman of the CEBR, added: ‘It would appear that the Chancellor has managed to burn his reputation for fiscal prudence for no good reason at all. He would have been so much better advised to have done his sums before presenting his Budget to the markets.’ 

He said falling energy prices and a freeze on personal tax allowances could mean public borrowing falls  to £64billion next year, which is £90billion less than the CEBR had previously pencilled in. 

The OBR’s forecasts will be given to the Treasury on Friday but won’t be made public until next month. 

After hitting an all-time low, the pound has since recovered to where it was when Mr Kwarteng unveiled his radical proposals ten days ago. 

But the Bank of England was forced to launch an emergency £65billion bond-buying programme last week to stabilise markets.