By RSM partner, Chris Etherington.
A year on from the Mini Budget, former prime minister Liz Truss is hitting the headlines again with a speech to the Institute for Government that has sought to reshape public opinion on the tax cuts that were announced at the time. Highlighting criticism that her team “were in too much of a rush”, Truss has outlined that she “tried to rear the pig, fatten the pig and slaughter the pig on market day”. Ultimately, in light of the economic backlash, the policies announced in the Mini Budget led to a severe case of foot in mouth disease.
As well as providing a retrospective of her time in Number 10, Truss has been keen to reset the agenda on her economic philosophy for growth, outlining her views on what the government should be doing on tax and spending.
It is not the first time she has sought to make such an intervention with her views first coming to the fore around 11 years ago, when Truss and a number of her contemporaries including Kwasi Kwarteng published a book titled Britannia Unchained. The book suggested ideas the UK could learn from other countries, contending that the UK has a “bloated state, high taxes and excessive regulation”. Those themes are echoed in this latest speech, almost word-for-word, as Truss outlines that a “supply side revolution has to encompass changes to tax, regulation and the size of the state”.
Truss has called for a reversal of the corporation tax increase, outlining that the UK “cannot afford to be uncompetitive internationally”, and that the UK should also refuse to implement the OECD minimum tax framework. She has also seemingly called for a cut in either income tax or national insurance, outlining the “need to reduce marginal tax rates to make it worthwhile to work at every income level”.
Truss further outlines that such cuts need to be balanced with getting “a grip on the ballooning welfare and pensions bill”, which it is suggested includes “slowing the rates of increases to benefits” and “raising the retirement age further”.
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It seems likely that the prime minister and chancellor will give short shrift to the speech by Truss, particularly given the first year of their tenure has been focused on correcting the “mistakes”, as Sunak badged them, made during her administration. Nevertheless, pressure will undoubtedly build on those in Downing Street from those within the Conservative party who support Truss’s views, if not the previous methodology.
Indeed, the policies we might see announced in the Autumn Statement later this year may not be enormously different to some of those suggested by Truss. We have already heard the Work and Pensions Secretary, Mel Stride, come out and state that the pensions triple lock is “unsustainable in the very long term”. So we could well see an announcement of a smaller increase to state pensions, alongside a similar curbing of the growth of benefits. The primary focus of the forthcoming Autumn Statement seems set to be on continuing to drive down inflation, justifying a further tightening of taxpayers’ belts before any generous tax cuts are announced. Immediate tax cuts seem unlikely but to counter potential bad news, perhaps we could see a revival of the pledge made by Sunak during a previous skirmish with Truss in the leadership contest, with cuts to income tax promised before the end of the next parliament.