ALEX BRUMMER: The Chancellor is committed to freeing up business and unleashing UK growth.
Stilettos have already been honed ahead of this week’s fiscal event.
Some leading economists paint Prime Minister Liz Truss and her Chancellor Kwasi Kwarteng as bigots bent on destroying Britain and pitting the interests of the wealthy corporatists against the poor.
But the fiscal event, or mini-budget, will be different. It would be a bold attempt to abandon the orthodoxy of the Treasury Department, which has driven taxation as a percentage of national output to its highest level since the late 1940s. He will also seek to free the financial sector from the shackles of Europe.
Some economists paint Prime Minister Liz Truss and Chancellor Kwasi Kwarteng (pictured) as bigots bent on destroying Britain and favoring the interests of wealthy corporatists.
The likely lifting of the bonus cap for bankers is part of a wider program to boost investment opportunities for London-based insurers, pension funds and other asset managers.
The decision was made after Quarteng’s dialogue with the financiers of the city. It is also committed to maintaining the UK’s status as a leader in professional services.
No one can pretend that the drastic change in direction is not due to difficult economic circumstances. Inflation is a global problem.
This week, the US Federal Reserve and the Bank of England will hit prices and consumption with higher interest rates.
The debate at the Bank is likely to focus on whether another half percentage point to 2.25 percent is appropriate, or whether to go bolder with three-quarters of a point.
The hawks at the Bank may well see a need to offset the Truss government’s bold moves.
On the spending front, he announced a big energy subsidy for every household over two years, with a bill cap of £2,500.
The least well-off have already received help as part of Rishi Sunak’s £15bn package in May.
The pandemic and rampant inflation have changed the way finance ministers work. Instead of once or twice a year, “financial events” now happen every few months.
Decisive steps will be taken in Kwarteng’s mini-budget this Friday. The proposed rise in corporate tax next year from 19 per cent to 26 per cent should be reversed.
This will undoubtedly be portrayed as a handout to rich companies. Hopefully, this will encourage beneficiaries to invest more in equipment and colleagues.
Where it is justified by increased productivity, the workforce should be rewarded with the same generosity as in the boardroom.
Another big tax change promised is the scrapping of the 1.25 per cent National Insurance rise for the NHS and social care. The measure was originally intended to raise around £12 billion a year.
Sunak began rolling that back earlier this year when he lifted the burden on those in lower tax brackets. There was also the idea of raising Sunac’s income tax by 1 pence, promised for 2024.
Kwarteng hopes that by freeing up business and spending, UK growth can be unleashed. And there may well be proposals for regional tax zones.
Progress may suffer due to a lack of credit and the forecast of a global slowdown or recession.
Britain lives off international trade and cannot avoid recession. But it would be foolish to make the situation worse by pushing for budget benefits.
Truss and company are only following the policies first proposed by Margaret Thatcher and followed by Gordon Brown, who recognized the need to unleash entrepreneurship.
This is a gamble in an era of high borrowing and debt. But the UK, with a lower debt-to-GDP ratio than many rivals (including the US, Japan, Italy and France), does have the fiscal flexibility to try something different.