Liz Truss is plannning even more tax cuts as the new PM says she is ‘unapologetic’ after her Chancellor’s mini-Budget sparked panic among markets and her critics.
Reforms to income tax, pension pots, and child benefits are reportedly being drawn up Treasury officials as the PM makes a bid to unleash a ‘decade of dynamism’.
She defended Friday’s Budget against criticism of tax cuts for higher earners, declaring in The Mail on Sunday that she was in pursuit of a ‘low-tax nation rich in opportunity’, despite the nervous reaction that also came from some of her own backbenchers.
In his striking announcement to the Commons, Chancellor Kwasi Kwarteng scrapped the top 45p rate of tax and cut 1p from the basic rate in the biggest package of tax cuts by a British Government for half a century.
It has now also been reported that 2023’s full Budget could see 1.6million savers benefit from a review of the lifetime and annual pension saving allowances.
High earners on £100,000 could benefit from a full income tax personal allowance, meaning a tax break of £5,000 a year. While those on £50,000 could also not be charged for claiming child benefit amid fears this stops families from trying to earn more wages.
Liz Truss has vowed to unleash a ‘decade of dynamism’ as she defended Chancellor Kwasi Kwarteng’s Budget on Friday against criticism of tax cuts for higher earners
It is thought the changes to pensions which mean savers with over £1million in their pension pots like doctors, police officers and highly paid nurses would stay longer in work if they do have to pay less than the 55 per cent tax at the moment.
If a doctor’s NHS pension increases by more than £40,000 in a year – an amount called the annual allowance – it could trigger a one-off tax charge of up to 45 per cent on the excess.
Gung-ho PM Liz Truss splits cabinet with plan to increase migrant numbers in bid to boost UK economy amid labour shortages
Liz Truss is planning to increase migrant numbers to Britain by loosening immigration rules as part of her mission to boost economic growth.
The Prime Minister is facing resistance from her cabinet colleagues to a move that would see labour shortages plugged by allowing businesses to recruit more overseas workers.
Suella Braverman, the Home Secretary, Kemi Badenoch, the Trade Secretary, and Jacob Rees-Mogg, the Business Secretary, are hesistant to give their backing, the Times reported.
It is understood that Nadhim Zahawi, the Cabinet Office minister, who chaired a meeting on the proposals, is also in favour along with Ranil Jayawardena, the Environment Secretary, and Kwasi Kwarteng, the Chancellor.
Businesses have been frustrated that the visa system for skilled work has not been responsive enough to shortages they have experienced and Ms Truss has faced industry demands for more migrant workers.
Ms Truss has insisted she is ‘unapologetic’ in ‘focusing relentlessly on economic growth’, even if that means implementing unpopular policies.
A senior government source told the Times: ‘There is a view within the Treasury that migration is good for growth. That is a view that appears to be shared by the PM and the chancellor.
‘We cannot tear up our immigration rules. People who voted for Brexit want to see controlled migration.’
Ms Badenoch is reportedly opposing a ‘freedom of movement’ type of agreement with India as a way of getting a trade deal.
And Mr Rees-Mogg is understood to be up for back the expansion of the Government’s shortage occupation list if it can be shown it will increase GDP per capita.
The seasonal workers programme, first launched in 2019, temporarily allows 40,000 overseas workers into the UK for seasonal roles in the horticulture and poultry sectors.
The cap is expected to be lifted and the six-month time limit extended, according to The Sun.
The Times also reports that it will be raised on seasonal agricultural workers and more occupations will be added to the list including broadband engineers, to meet the Government’s deadline of making sure 85 per cent of UK homes have full-fibre broadband available.
There is also a suggestion that she would change the strict requirements around the English language for visa applicants. And it is said there is also a plan for a new visa giving entry for graduates of the top 50 or top 100 global universities.
A No 10 source said: ‘We need to put measures in place so that we have the right skills that the economy, including the rural economy, needs to stimulate growth.
‘That will involve increasing numbers in some areas and decreasing in others. As the Prime Minister has made clear, we also want to see people who are economically inactive get back into work.’
The Government is expected to set out its plan for migration reform later this year. It appears to be a pivot away from Boris Johnson’s stance on immigration and may anger some Brexit voters.
Ms Truss has faced industry demands for more migrant workers to be given visas to come to the UK, with labour shortages one of the main concerns voiced by employers across a range of sectors.
Downing Street did not deny that the Prime Minister is planning to liberalise routes to allow foreign workers to move to the UK, as first reported in The Sun.
During her campaign for the Tory leadership, Ms Truss promised to tackle the labour shortages in farming – partly caused by post-Brexit freedom of movement restrictions and accentuated by the pandemic – with a short-term expansion to the seasonal workers scheme.
A recent Government report warned that such shortages were badly affecting the food and farming sector, often forcing farmers to cull healthy pigs and leave fruit rotting in the fields.
The longer a doctor has worked for the NHS and the bigger their salary, the more likely it is that a fairly modest pay rise will result in their pension growing by more than £40,000 in a single year – meaning senior doctors are most likely to be hit with the charge.
Sir Steve Webb, a Pensions Minister in David Cameron’s Coalition, said in July that doctors shouldn’t have to worry about ‘the tax implications of doing extra hours’, adding: ‘It’s a nonsense that we are in this situation.’
Peter Herniman, of Ballards accountants and tax advisers, said: ‘We deal with approximately 350 medical consultants. Over 50 per cent have turned down extra NHS work because of this.’ He cited a consultant surgeon who declined extra NHS shifts worth £10,000 a year because it would raise her total annual tax bill by £14,000, leaving her £4,000 out of pocket.
Derek Benstead, a pensions specialist at First Actuarial, said: ‘To make the problem go away, the lifetime allowance needs to go back up to at least £1.5 million, or ideally £1.8 million, where it was in 2011, along with the abolition of the annual allowance.’
Universal Credit’s ‘taper rate’ could fall by five points to 50 per cent – meaning that claimants who are working will be able to keep more of their benefits.
A new tax-free allowance which is being considered would mean less tax between £100,000 and £125,140 for top earners.
A Whitehall source told The Telegraph that ‘the marginal tax rate is absurd’. ‘It would be sensible because the incentives that the current marginal tax rate creates are awful, and I think it’s one of the largest reasons why there’s such a bottleneck in GPs,’ they added.
However, Ms Truss could face a revolt from backbench Tories over her bold tax plan as they mull over ‘hitting the nuclear button’ if the pound falls below the dollar.
One Tory MP told The Telegraph: ‘My biggest anxiety is that I’m going to wake up on Monday and it’s going to be Black Monday.’
Another Conservative MP said: ‘If the pound drops below one dollar, that’s territory for me where I’m afraid I would hit the nuclear button … I just think that would be unconscionable.’
‘The commentary, the way the market responds through the next two weeks, will all condition how we come back on October 11 [after the party conference recess],’ a colleague adds.
‘I don’t think it’s that people aren’t clear that they’re very concerned, but the landing of what the response is not yet defined.’
Business chiefs welcomed the measures, with the CBI saying there was ‘no choice but to go for growth’ – while former Tory treasurer Lord Ashcroft said that with the Chancellor’s mini-Budget it ‘seems after 12 years to have a Conservative government’.
But The Institute for Fiscal Studies think-tank said the freeze in the personal allowance and the threshold for the higher 40p rate of income tax represented ‘big income tax rises’.
Sam Robinson, of the liberal conservative Bright Blue think-tank, added: ‘When it comes to income tax, it would have been far better to (raise) the starting threshold for the basic rate.’
Financial analysts said it was a huge gamble that could fuel inflation and drive up interest rates to levels not seen in 20 years.
And financial markets took fright, with sterling sliding to its lowest level against the dollar since 1985. On Friday, £1 was worth just $1.09, down 3 per cent in a day. The price of government borrowing soared even higher, sparking fears of a further rise in interest rates.
Paul Johnson, director of the Institute for Fiscal Studies, said: ‘Mr Kwarteng has shown himself willing to gamble with fiscal sustainability in order to push through these huge tax cuts.
‘He is willing to shrug off the risks of inflation, and to invite significantly higher interest rates. He is not just gambling on a new strategy, he is betting the house.’
The respected IFS think-tank had suggested it could be the biggest tax move since Nigel Lawson’s 1988 Budget, when Ms Truss’s heroine Margaret Thatcher was PM.
But director Paul Johnson said afterwards that in fact it was the largest since 1972 – when Ted Heath was trying to create an election boom – and ‘quite extraordinary’.
‘It was like having an entirely new Government,’ he said. ‘This was the biggest tax-cutting event since 1972, it is not very mini. It is half a century since we have seen tax cuts announced on this scale.’
Mr Johnson said the tax cuts would benefit high earners more, and had been pushed through ‘without even a semblance of an effort to make the public finance numbers add up’.
‘Instead, the plan seems to be to borrow large sums at increasingly expensive rates, put government debt on an unsustainable rising path, and hope that we get better growth.
‘This marks such a dramatic change in the direction of economic policy-making that some of the longer-serving cabinet ministers might be worried about getting whiplash.’
Referring to the prospect of borrowing reaching £190billion a year, the think-tank added: ‘At 7.5 per cent of national income this would make it the third-highest peak in borrowing since the Second World War, after the Global Financial Crisis and the COVID-19 pandemic.’
The Bank of England pushed up interest rates by 0.5 percentage points to 2.5 per cent yesterday, the highest level since 2008. But it surprised many by stopping short of a bigger increase, suggesting that UK plc is already in recession.
Liz Truss (pictured in parliament with Treasury Minister Chris Philp on left, Kwasi Kwarteng on her right and on right of him Levelling Up Secretary Simon Clarke and Work and Pensions Secretary Chloe Smith) has sparked a cabinet row with a plan to increase migrant numbers to Britain in a bid to boost economic growth
Suella Braverman (left), the Home Secretary, Kemi Badenoch (right), the Trade Secretary and Jacob Rees-Mogg, the Business Secretary, are said to be resistent to the measure, the Times reported
Liz Truss leaves Downing Street for the Commons on Friday on what could prove to be a pivotal day for her premiership
Making her first public comments on the so-called ‘mini-Budget’ – which also included cuts to stamp duty, National Insurance and Corporation Tax – Ms Truss pledges that her administration will be defined by ‘taking tough choices and doing things differently’ from her Tory predecessors in No 10, adding: ‘We will usher in a decade of dynamism by focusing relentlessly on economic growth.’
The move is part of a ‘dash for growth’ which is intended to turbocharge the economy – and boost the Tories’ chances of winning the next Election.
Dismissing criticism that the £45billion worth of measures would disproportionately benefit the rich, Ms Truss writes: ‘Growth means families have more money in their pockets, more people can work in highly paid jobs and more businesses can invest in their future.
‘It provides more money to fund our public services, like schools, the NHS and the police.
‘We will be unapologetic in this pursuit… Everything we do will be tested against whether it helps our economy to grow or holds it back.’
Ms Truss also announced that the Government would be introducing new ‘growth loans’ to help businesses that have been trading for fewer than five years to expand, in recognition that small businesses are ‘the lifeblood of the economy’.
GROWTH BOOST FOR SMALL BUSINESSES
Small businesses will be offered new ‘growth loans’ by the Government as part of the Prime Minister’s efforts to pull the economy out of the doldrums.
Liz Truss announces in the MoS today an extension of the Government’s Start-Up Loans programme – which offers support and funding to new businesses – to cover companies which have been running for up to five years.
The Start-Up scheme – which was established to help firms in their earliest stages – has provided more than 90,000 loans since its inception in June 2012.
The loans are subject to a fixed interest rate of six per cent, and the programme provides support – and discounts on products for businesses – to those who might find it difficult to secure funds from traditional lenders.
In her article, Ms Truss says: ‘I am on the side of all those who take responsibility and do the right thing, from setting up their own businesses to working hard and aspiring for a better life for themselves and their family.
‘Our clear plan will help them to thrive.
‘I know how hard it has been for small businesses. They are the lifeblood of our economy. When small businesses succeed, Britain succeeds too.’
Business Secretary Jacob Rees Mogg said: ‘This Government is relentlessly focused on driving growth to create better jobs, boost wages and fund our vital public services like the NHS.
‘Encouraging entrepreneurship and new businesses to thrive is critical to growing the economy and raising living standards.
‘From a hair salon in Wales, to a furniture business in Northern Ireland and a cake seller in the Lake District, expanding the Start-Up Loans scheme will support these small businesses through this challenging period and position them to grow – creating jobs and opportunities across the UK.’
Labour seized on Mr Kwarteng’s abolition of the top rate of tax, which will hand an average £10,000 back to the country’s top 660,000 earners.
As her party gathered in Liverpool for its annual conference, Deputy Leader Angela Rayner described Ms Truss’s ‘trickle-down economics’ approach as ‘a very dangerous gamble on our economy and future generations’.
She said: ‘I don’t accept the argument of trickle-down economics – give those at the top loads more money and that will filter down to those at the bottom.
‘That’s not how it works. We’re going to saddle the next generation with more debt.’
Torsten Bell, of the Resolution Foundation think-tank, said those earning £1million a year would get a £55,000 tax cut next year from the wider package.
He told Sky News: ‘The tax cuts are heavily focused on the very highest-income households – 45 per cent of the gains next year will go to the top 5 per cent.’
The Joseph Rowntree Foundation said the plan showed the Government had ‘no understanding of the economic reality facing millions across the UK’.
Meanwhile anti-poverty charity’s Rebecca McDonald said: ‘This is a budget that has wilfully ignored families struggling through a cost of living emergency and instead targeted its action at the richest.’
Shadow chancellor Rachel Reeves said Mr Kwarteng’s fiscal statement was ‘based on an outdated ideology that says if we simply reward those who are already wealthy, the whole of society will benefit’, adding: ‘They have decided to replace levelling up with trickle down.’
And Sarah Coles, an analyst at the financial services firm Hargreaves Lansdown, warned: ‘Putting money in the pockets of higher earners also raises an inflation risk.
‘If they don’t need this extra cash to fill a hole in their budget, there’s a risk their spending will rise, pushing up prices even further.’
According to the Treasury, the measures will pay for themselves if they succeed in adding an extra one per cent a year to GDP.
In her MoS article, the Prime Minister reinforces her Thatcherite credentials, saying: ‘We believe people should be in control of their lives and keep more of the money they earn.
‘That is why it would not be right to allow families and businesses to be lumped with the heaviest tax burden in 70 years.
‘People know better than any Government what to do with their hard-earned money.
‘And so, we have set out our clear plan to deliver £45billion of tax cuts in what will be the biggest tax-cutting package for generations.’
Ms Truss adds: ‘We will get Britain moving by cementing our status as the best place in the world to do business… It is our duty to make Britain the most competitive and successful economy possible, and we will do whatever it takes to deliver that.
‘For too long, politicians have fought over how to slice up the economic pie. We will focus instead on growing the pie to the benefit of families and businesses.’
Labour Deputy Leader Angela Rayner described Liz Truss’s ‘trickle-down economics’ approach as ‘a very dangerous gamble on our economy and future generations’
LIZ TRUSS: For too long politicians have fought over how to slice up the economic pie. My mission is to make it much bigger
When I entered Downing Street a little over two weeks ago, I promised to unleash the potential of our United Kingdom. I promised to get us through the economic storm we face in the wake of Covid and Putin’s awful war in Ukraine and to ensure we emerge a stronger and better nation.
We are now delivering by taking tough choices and doing things differently. For years, our economy has not grown as much as it could and should. Instead, we will usher in a decade of dynamism by focusing relentlessly on economic growth.
We have a clear plan to build an ambition Britain, where everyone everywhere can realise their potential. We will make good on the promise of Brexit by seizing our chance to take the shackles off our economy and become a more enterprising, low-tax nation rich in opportunity.
When I entered Downing Street a little over two weeks ago, I promised to unleash the potential of our United Kingdom LIZ TRUSS writes
I am optimistic about the future. I know we have the talent, enterprise and energy to achieve higher economic growth.
Of course, growth is about more than numbers on a spreadsheet. It is fundamentally the mark of a thriving economy.
Growth means families have more money in their pockets, more people can work in highly paid jobs and more businesses can invest in their future. It provides more money to fund our public services, like schools, the NHS and the police.
We will be unapologetic in this pursuit, as set out by my friend the Chancellor this week in his Growth Plan. Everything we do will be tested against whether it helps our economy to grow or holds it back.
As Prime Minister, I am working day and night to support people across the country. I am on the side of all those who take responsibility and do the right thing, from setting up their own businesses to working hard and aspiring to a better life for themselves and their family. Our clear plan will help them to thrive.
I know how hard it has been for small businesses. They are the lifeblood of our economy. When small businesses succeed, Britain succeeds too.
Today, I can announce we will beef up our Start-Up Loans scheme to help brilliant businesses realise their ambitions. Businesses which have been trading for up to three years can now be offered finance.
Liz Truss became Britain’s third female Prime Minister just over two weeks ago
Ms Truss has promised to ‘get Britain moving again’ with her plans and a brand new cabinet
We will also be offering new ‘growth loans’ to those who have been trading for up to five years. This is the latest step in our drive to get Britain moving.
Our pursuit of growth will be reinforced by a responsible approach to the public finances.
We will set out our approach more fully in due course, including how we plan to get our national debt down over the medium term.
We are tackling the biggest drag on growth, namely the energy crisis engineered by Putin. Our energy scheme will save the typical household £1,000 a year on their bills and roughly halve the cost of business energy bills. It will reduce peak inflation by about five per cent, helping to ensure the pound in your pocket buys as much tomorrow as it will today. We believe people should be in control of their lives and keep more of the money they earn.
That is why it would not be right to allow families and businesses to be lumped with the heaviest tax burden in 70 years. People know better than any government what to do with their hard-earned money. And so we have set out our clear plan to deliver £45 billion of tax cuts in what will be the biggest tax-cutting package for generations.
We will benefit many millions of people across the county by reversing the rise in National Insurance, cutting the basic rate of income tax next year by 1p and abolishing the additional rates of income tax.
LIZ TRUSS: ‘We are tackling the biggest drag on growth, namely the energy crisis engineered by Putin’
We have slashed Stamp Duty to help people climb the housing ladder, saving the average homebuyer £2,500 and first-time buyers up to £8,750.
This will have a considerable effect, with a third of all homes on sale in England alone now estimated to be exempt from the tax.
We will get Britain moving by cementing our status as the best place in the world to do business. We are putting our money where our mouth is in encouraging businesses to invest, create jobs and grow. We have followed through on our promise to suspend the corporation tax rise, with the result that our attractiveness to businesses will remain unbeatable.
We will get Britain building everything local communities need quicker, from roads and rail to broadband and energy infrastructure. We will do so by cutting through the red tape, much of it inspired by Brussels, stopping people from getting spades in the ground.
We will level up the country by harnessing the power of the private sector. That is why we are in talks about creating Investment Zones across the country, from the Tees Valley to the West of England and beyond. They would offer an unprecedented set of tax incentives for business to invest, create jobs and grow.
Ms Truss has vowed to level up the entire country by ‘harnessing the power of the private sector’
We will maximise the potential of our City of London to benefit the wider UK economy by reforming outdated and burdensome Brussels-inspired regulations like Solvency II.
It is our duty to make Britain the most competitive and successful economy possible, and we will do whatever it takes to deliver that.
For too long, politicians have fought over how to slice up the economic pie.
We will focus instead on growing the pie to the benefit of families and businesses.
What Mail on Sunday readers have seen this week is just the start. Over the next few weeks and beyond, we will be setting out more measures to get the economy growing, deliver more opportunities for people across the country, and help hard-working families.
I won’t just talk about things, I will actually do things. The British public can trust me to take the difficult decisions, to do what I believe is right, and to deliver what I say I will.
I will get Britain moving again.
https://www.dailymail.co.uk/news/article-11246489/Liz-Truss-vows-unleash-decade-dynamism-defends-Chancellors-revolutionary-mini-Budget.html?ns_mchannel=rss&ns_campaign=1490&ito=1490 Liz Truss vows to unleash ‘decade of dynamism’ as she defends Chancellor’s revolutionary mini-Budget