'Biggest tax cuts since Thatcher' to be made in Kwarteng's mini budget after warnings UK already in recession
23 September 2022, 00:05 | Updated: 23 September 2022, 09:10
The biggest package of tax cuts since Margaret Thatcher will be announced on Friday as Kwasi Kwarteng looks to kick-start Liz Truss's campaign promises.
Listen to this article
Loading audio...
The chancellor will set out his mini-budget later and announce tens of billions in increased spending and tax reductions - while critics warn more spending and lower taxes will lead to heavy amounts of borrowing.
He is set to tell MPs that a "cycle of stagnation" has led to the biggest tax burden Britain has experienced since the 1940s.
Details about how the help with energy bills - a £2,500 annual cap on charges for two years, along with a six-month freeze for businesses - will also be announced, amid criticism that he had would not allow forecasting on his mini-budget by the Office for Budget Responsibility.
And new investment zones will also be set up, creating low-tax and low-regulation areas he believes will boost growth across the UK.
Mr Kwarteng believes his policies will generate enough money to fund public services.
On Friday LBC's Nick Ferrari grilled Levelling Up Secretary Simon Clarke on the plans and how they will benefit poorer people.
Nick accused the government of being "the same old Tory with the same old story", after reports the government would slash corporation tax and remove the cap on bankers bonuses whilst tightening rules for claiming benefits.
"You're there for the rich but not for the poor," challenged Nick.
"No, we're there to raise living standards and opportunity for everybody," Mr Clarke said.
"My constituents want to see an end to a culture of welfare as much as anybody.
"They believe passionately in hard work and enterprise, and they also recognise that if people are earning more they are paying more in tax, and if they're paying more in tax - and we have a very progressive taxation system in this country - then that is good for the public services on which the poorest and most vulnerable rely."
Nick Ferrari grills Levelling-up Secretary Simon Clarke
Mr Kwarteng is due to tell the House of Commons: "Growth is not as high as it needs to be, which has made it harder to pay for public services, requiring taxes to rise.
"This cycle of stagnation has led to the tax burden being forecast to reach the highest levels since the late 1940s.
"We are determined to break that cycle. We need a new approach for a new era focused on growth."
His speech will come amid a storm of economic problems - soaring inflation, the cost-of-living crisis, and rising interest rates set by the Bank of England after it warned the UK may already be in recession. It raised interest rates by 0.5 per cent to reach highest level since 2008 financial crisis - 2.25% - on Thursday.
Mr Kwarteng has already confirmed he will reverse the National Insurance hike, cancel the planned corporation tax rise from 19% to 25% and scrap the limit on bankers' bonuses to allow London to compete with international financial hubs.
After Ms Truss said she was willing to be an unpopular Prime Minister if it meant implementing what she believes are the right policies, Mr Kwarteng is to say her Government will be "bold and unashamed in pursuing growth – even where that means taking difficult decisions".
The planned cut of 1p in income tax in 2024 could be brought forward, and VAT could be slashed from 20% to 15%.
Read more: Fracking ban to be lifted in England to 'bolster energy security', govt confirms
Investment zones with lower tax and laxer planning rules could be established after talks with councils in the West Midlands, the Tees Valley and Somerset, among other places.
Measures to speed up about 100 significant infrastructure projects, such as roads, railways and energy-related plans, may include watered down environmental assessments.
Reports also suggest stamp duty could be cut and that some 120,000 people on Universal Credit may need to actively look for work or lose their benefits.
Critics fear high spending and lower taxes could lead to heavily increased borrowing.
The Institute for Fiscal Studies said the growth strategy was "a gamble at best", and its director, Paul Johnson, said: "This will actually, we think, be the biggest tax-cutting fiscal event since Nigel Lawson's budget of 1988."
Labour's shadow chief secretary to the Treasury, Pat McFadden, said "The Conservatives don't have a new plan for economic growth. They have simply moved from levelling up to trickle down and that has not worked in the past.
"Their choice to fund all of this through borrowing and not attempt to fund even a proportion of it through a windfall tax on the energy companies making the most from the current crisis increases risk and leaves British taxpayers paying more for longer.
"They are doing all of this at a time when inflation is high and interest and mortgage rates are already on the rise."
Mr Kwarteng has said he will set out a timeline for an independent economic forecast from the Office for Budget Responsibility during Friday's speech.
