Liz Truss has pledged to review all tax rates to help struggling households and businesses through the cost of living crisis, in her latest break from Treasury orthodoxy.
The Prime Minister’s remarks during his first overseas trip to the United States pave the way for a radical overhaul of the system that could include a review of income tax brackets.
In an interview atop the Empire State Building on Tuesday, she told the BBC: “We need to look at our tax rates. Corporate tax must therefore be competitive with other countries so that we can attract this investment.
Truss had signaled overnight that further tax cuts could be on the way as she strives to boost economic growth in the face of the biggest economic storm the UK has seen in a generation.
She told reporters on the plane to the United States that the “first thing” she wanted to deliver was economic growth, adding: “Lower taxes lead to economic growth, there’s no question in my spirit.”
The Prime Minister took a Reagan-style “trickle down” approach to the economy throughout the Conservative leadership race, arguing that it was wrong to view all economic policy through the ” prism of redistribution”.
However, that puts her on a collision course with Joe Biden, whom she will meet on Wednesday for bilateral talks. The US President tweeted: “I’m sick of the economic fallout. It never worked. We are building an economy from the bottom up and from the middle out.
On a show on Tuesday, the Prime Minister defended her plan to cut National Insurance, which has drawn criticism as it benefits the highest earners 250 times more than the poorest, admitting it was more valuable to the wealthy.
She told Sky News: “I don’t buy this argument that cutting taxes is somehow unfair. What we know is that people with higher incomes generally pay more tax. Therefore, when you lower taxes, there’s often a disproportionate benefit because those people pay more taxes in the first place.
“We should base our tax policy on what will help our country succeed. What will generate this economy that benefits everyone in our country. What I don’t buy is the idea that corporate tax cuts don’t help people in general.
Truss also confirmed that she would cancel the National Insurance increase and scrap the planned corporate tax hike in a mini-budget on Friday, which may have to circumvent tax rules on debt reduction.
Some Tory MPs believe Chancellor Kwasi Kwarteng could bring forward by a year his predecessor Rishi Sunak’s promise to cut income tax by 1% from 2024.
Business groups expect changes to business tariffs and VAT reductions to deal with the energy crisis, as well as a longer-term review of these taxes. Kwarteng is also expected to announce that the cap on banker bonuses will be removed.
Truss told Sky News she was prepared to be an unpopular prime minister to bring in measures she believed would help the economy. “Yes, yes I am,” she said. “What’s important to me is that we develop the UK economy.”
She dismissed concerns about the fall of the pound and the state of the economy. “My belief is that Britain’s economic fundamentals are strong,” she told the BBC. “We have relatively low debt compared to the rest of the G7.”
She added: “What I want is to restore those economic fundamentals and what the Chancellor will describe on Friday is his approach showing that we are fiscally responsible, we are going to conduct our policies in a fiscally responsible way. And we will help make the UK more competitive and successful. »
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