Andrew Hammond

Opinion | Truss gambles big on emergency UK budget with promise of huge tax cuts

As the UK prepares to unveil emergency economic measures, tax cuts seem all but certain – what remains hazy is how they will be paid for and whether they will bring down inflation

A lack of detail on government spending and plans to boost growth is also fuelling uncertainty in a time of severe economic hardship

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A motorist checks a petrol pump at a filling station in London, on June 9. Britain’s new Prime Minister Liz Truss has pledged to rebuild an ailing economy, on the brink of a potentially long recession, with record inflation and millions in need of government help to cope with energy bills. Photo: AP

Andrew Hammond

Published: 11:30pm, 21 Sep 2022

UK Chancellor Kwasi Kwarteng is set to deliver the first major fiscal event of the new government on Friday, with the Truss team in a risk-taking mood.

In his emergency budget, Kwarteng will start delivering on Prime Minister Liz Truss’ pledge to bring an end to what she calls a UK consensus that has “peddled a particular type of economic policy for 20 years that hasn’t delivered”.

One early signal of intent was the government’s sacking last week of Treasury permanent secretary Tom Scholar, who was seen as a purveyor of this orthodoxy, including being against deficit spending.

With UK GDP virtually stalling in July, and inflation nudging double digits, Truss and Kwarteng have put revitalising growth at the heart of their economic agenda and pledged to “start cutting taxes from day one”.

While the scope of the announcements is unclear, Truss has previously pledged to reverse April’s rise in national insurance and abolish next year’s planned corporation tax hike from 19 per cent to 25 per cent.

Overall, more than 20 different measures are expected to be unveiled. This potentially includes a controversial plan to abolish the cap on banker bonuses, and taking an axe to “nanny state” measures such as the UK’s sugar tax. Kwarteng will also detail plans for a £150 billion (US$170 billion) cap on energy prices.