‘New era of Britain’: Kwarteng to unleash economic blitz with huge tax cut announcement

The Chancellor is launching an economic blitz that promises to drive down inflation and push up growth. He will unleash tax cuts to fuel business investment and help hard-pressed workers keep more of their own cash.

Mr Kwarteng will vow to be “bold and unashamed” in pursuing growth even if it means taking difficult decisions.

He will say: “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.

“That is how we will deliver higher wages, greater opportunities and sufficient revenue to fund our public services, now and into the future. That is how we will compete successfully with dynamic economies around the world.

“That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth. We will be bold and unashamed in pursuing growth – even where that means taking difficult decisions. The work of delivery begins today”.

Mr Kwarteng will set out a 30 point “growth plan” in his first budget since becoming Chancellor just over a fortnight ago.

He will cut taxes and red tape as part of the mission to create jobs, improve living standards and promote confidence in the UK economy.

Mr Kwarteng will also pledge to speed up around 100 major infrastructure projects across the country. The government will prioritise transport, energy, and digital schemes after decades of bureaucratic delays.

But the Chancellor is giving the emergency financial statement to the Commons against bleak predictions the UK is already in recession.

The Bank of England said it believes GDP will fall 0.1 percent in the current quarter on the back of a reported 0.2 percent fall in the previous three months. A technical recession is when the economy shrinks for two quarters in a row.

The central bank is hiking interest rates to 2.25 percent – the highest rate in more than 13 years. Downing Street said forecasts can “fluctuate and change” as economic interventions are made.

The Chancellor will announce talks are taking place with 38 local authorities in England about setting up new low tax, low regulation investment zones. Areas include parts of the West Midlands, Tees Valley, Somerset and Hull.

The government believes the zones will be “hubs for growth” and will be “emblematic” of the modern Britain it wants to create.

Generous, targeted and time-limited tax cuts for businesses will be offered to boost productivity and create new jobs.

It is hoped the reforms will encourage investment in new shopping centres, restaurants, apartments and offices.

The investment zones will also have “liberalised” planning rules to allow more land to be used for housing and commercial development.

Mr Kwarteng also confirmed last night that the 1.25 percent national insurance hike introduced by Rishi Sunak to cover strains in health and social care is being reversed from November 6. Legislation allowing the change to be made was tabled in the Commons yesterday.

The Chancellor said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.

“Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the levy will help them grow, whilst also allowing the British public to keep more of what they earn.”

The Treasury said most employees will receive a cut to their national insurance contribution directly via their employer’s payroll in their November pay, although some may be delayed to December or January.

The NI hike was expected to raise about £13 billion a year to help tackle NHS backlogs and pressures in social care, but the government insists funding will still be maintained.

Mr Kwarteng insists that growing the economy will increase the tax revenues needed to pay for public services.

The Institute for Fiscal Studies said the plan to drive growth was “a gamble at best” and that ministers risked putting the public finances on an “unsustainable path”.

But business leaders welcomed the move, saying it was a “big win” for struggling firms.

Shevaun Haviland, director general of the British Chambers of Commerce, said: “After months of campaigning, today’s Government announcement to reverse the increase to the National Insurance Contribution (NIC) is a big win for the British Chambers of Commerce and the business community. This is much needed support for businesses during these difficult times.”

UK Hospitality chief executive Kate Nicholls said: “Hot on the heels of government support for businesses facing rising energy costs, cutting employer NI contributions is more excellent news for the hospitality sector, and will help businesses reduce their costs as they attempt to return to profitability while facing a perfect storm of financial pressures, including the interest rate rise, VAT back to 20 percent, and the frankly unfair business rates regime.

“Cutting employee NICs is a great way to ensure people keep more of their money, primarily so that they’re able to pay their bills, and then to enjoy affordable luxuries, such as visiting hospitality venues.

“This announcement is particularly welcome, as UKHospitality has long campaigned for an employer NICs regime that supports job creation, which this move will certainly help towards.”

Kitty Ussher, chief economist at the Institute of Directors, said: “Businesses right across the country will be applauding the Government’s realisation that raising employers’ national insurance was a mistake.

“As the Institute of Directors has consistently and repeatedly argued from the outset, this was quite simply a tax on jobs, which businesses had to pay regardless of whether they are profitable.”

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  • 26 минут назад 28.09.2022Politics
    ‘Things to come!’ Brussels banking on UK’s financial woes breaking deadlock over Protocol

    EU officials hope the UK’s financial woes will help break the deadlock over Brexit negotiations surrounding the Northern Ireland Protocol, a report has claimed. The Telegraph has revealed that multiple sources have claimed Maros Sefcovic hopes the situation will force Liz Truss to buckle on Brexit to turn her attention to domestic issues.

    Brussels’ Czech-born negotiator will hold a telephone call with Britain’s Brexit-backing Foreign Secretary James Cleverly on Friday for the pair’s first discussion since Ms Truss succeeded Boris Johnson as Prime Minister.

    The call has been labelled by insiders as an introduction but it has been suggested that it will also be used to sketch out a roadmap for future negotiations concerning the Protocol.

    One source told the Telegraph: “It’s seen as a precursor for things to come.”

    They also claimed that the pair would work towards an October 28 deadline, after which new elections will be held to break the deadlock in Stormont.

    A second source told the broadsheet that the call had been rearranged following the death of Queen Elizabeth II and would look to start a “new conversation”.

    Ms Truss’ Government was dealt a major blow just days after Chancellor Kwasi Kwarteng unveiled a mini-budget which included £45billion in tax cuts.

    Sterling soon slumped to a record low against the dollar.

    The Bank of England could also introduce a “significant” interest rate rise, according to Threadneedle Street’s chief economist.

    The Bank recently hiked interest rates to 2.25 percent, up from just 0.1 percent last December.

    In recent public interventions, Mr Sefcovic and Ms Truss have indicated they hope to reach a negotiated settlement.

    According to the Telegraph, sources in Brussels said the Northern Ireland Protocol Bill must be taken off the table as it grants ministers the ability to tear up part of the UK-EU treaty unilaterally.

    The report comes as Westminster continues to heap pressure on the Democratic Unionist Party (DUP) to drop its boycott of the Northern Irish Assembly.

    Sir Jeffrey Donaldson’s party has refused to engage in talks with Sinn Fein to form a Government in Belfast until Ulster’s post-Brexit trading arrangements are either scrapped or overridden.

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    However, Ms Truss’ new Northern Ireland Secretary Chris Heaton-Harris has warned there is “no excuse” for refusing to return to power sharing in Stormont.

    Mr Heaton-Harris, former chairman of the European Research Group, said his “priority is to see the formation of an executive as soon as possible”.

    The Daventry MP added: “I understand that the Northern Ireland Protocol is causing real problems and that we must find a solution.

    “I believe this can be found through a negotiated settlement with the EU.

    “But if this is not possible, we will continue with our legislation to resolve the very serious issues with the Protocol.”

  • 26 минут назад 28.09.2022Politics
    NHS could be ‘finished’ by spending cuts caused by mini-budget, warns Bank of England

    The National Health Service may be so heavily impacted by spending cuts brought on by Kwasi Kwarteng’s mini-budget that it could be “finished”, according to Sir Charlie Bean. Sir Charlie, who is also a member of the Office of Budget Responsibility, has warned that if Liz Truss does not reverse current fiscal plans there be no other option for the NHS.

    The International Monetary Fund (IMF) has also criticised the budget and Mr Kwarteng’s plans to encourage growth through tax cuts and curb inflation through interest rate rises.

    The IMF has expressed concerns that it will “likely increase inequality” in the UK.

    Sir Charlie warned that markets are losing faith in the Government.

    He told Sky News: “The thing about credulity is when you lose it, it can be quite difficult to get it back. It takes time.

    “I would say that we’ve got a few steps down the road. It is serious.

    “And I don’t think the Government can really afford just to say, ‘Oh, this is just a little bit of froth in markets; they’ll come to their senses as soon as we lay out our full programme.

    “There are real questions to be addressed about how the Government’s fiscal strategy hangs together, and how it can ensure that the debt to GDP ratio is back on to a sustainable path by the medium term.”

    When asked how the situation could be improved he added: “The ideal would be to get a Tardis and go back and undo the errors… I find it implausible that the measures that are presently being contemplated to boost growth… will be anything like powerful enough to obviate the need for some significant spending cuts.”

    Sir Charlie shared his fears that potentially £50billion worth of cuts would have severe consequences for the public sector.

    He said: “Frankly, the only way you can really deal with this is with a very fundamental rethinking of the boundaries of the state.

    “So if you want to get the share of Government spending to GDP down, you have to be prepared, say, to move away from our own health service, which is free at the point of delivery to one funded by social insurance like they do in Germany.”

    The British Medical Journal has described the mini-budget as having “worrying implications for the future of the NHS”.

    The country’s health service continues to struggle with a backlog of patients from the pandemic and increased ambulance wait times.

  • 4 часа, 26 минут назад 28.09.2022Politics
    ‘We’ll just change the rules!’ Rebel Tory MPs double down amid revolt against Liz Truss

    Tom Newton Dunn has discussed the backlash from Tory MPs against the leadership of Liz Truss after the pound collapsed sparking panic in the Conservative party. It comes after Tory backbencher Sir Graham Brady confirmed that Liz Truss can’t be challenged during her first year as Tory Party leader.

    Mr Newton Dunn told TalkTV: “Well the backlash from nervous Tory MPs against their new Prime Minister and Chancellor continues today.

    “One prominent Rishi Sunak supporter the Commons Transport Committee chair Hugh Merriman accused Liz Truss of ‘losing our voters with policies we warned against.’

    “And there are also reports of some Tory MPs even submitting letters of no confidence against Ms Truss to trigger yeah, you’ve got it yet another Tory leadership contest, but she can rest easy on that, at least for the moment.

    “For there is a little known Tory Party rule confirmed to this programme by the rules guardian of the 1922 committee chair Sir Graham Brady on your screens now that there can be no leadership challenge to any new leader during their first 12 months.”

    He added: “Small graces, while I do have to tell you that I tweeted that a few minutes ago, and it was messaged to me by another Tory MP ‘we’ll just change the rules.’”

    Chancellor Kwasi Kwarteng has said he is “confident” his tax-cutting strategy to drive economic growth will work despite the turmoil on the financial markets.

    In talks with City investors in the wake of Friday’s mini-budget, Mr Kwarteng insisted he was committed to “fiscal discipline” and that he had a “credible plan” to start to bring down the UK debt.

    He also emphasised the importance of the “supply side” reforms ministers will be setting out in the coming weeks, including his “Big Bang 2.0” reforms of the financial market regulations, in supporting growth.

    “We are confident in our long-term strategy to drive economic growth through tax cuts and supply side reform. Supply side reforms are critical – increasing capacity brings down prices,” he said, according to a Treasury readout of the meeting.

    “Cabinet ministers will set out more supply side measures over the coming weeks to make meaningful change. Right across government, departments have to be focused on this.

    “As I said on Friday, every department will be a growth department.

    “We are committed to fiscal discipline, and won’t re-open the spending review. We have a medium-term fiscal plan coming on November 23, alongside an OBR (Office for Budget Responsibility) forecast. That will be a credible plan to get debt to GDP falling.

    “We have responded in the immediate term with an expansionary fiscal stance on energy because we had to. With two exogenous shocks – Covid-19 and Ukraine – we had to intervene. Our 70-year-high tax burden was also unsustainable.

    “I’m confident that with our growth plan and the upcoming medium term fiscal plan – with close cooperation with the Bank – our approach will work.”

    His comments came after the pound plunged to a record low on Monday in the wake of his Commons statement last week setting out his plan for £45 billion of tax cuts.

    In an attempt to calm the markets, Bank of England Governor Andrew Bailey issued a statement insisting they would raise interest rates by “as much as as is needed” to shore up the pound and keep the lid on inflation.

  • 4 часа, 26 минут назад 28.09.2022Politics
    Brexiteer claims Remainers ‘to blame’ for run on the pound: ‘Never felt the kind of hate’

    A Brexiteer has claimed Remainers are to blame for the recent run on the pound. The currency fell to a record low against the dollar following the announcement of the biggest tax cuts in half a century.

    New Chancellor Kwasi Kwarteng said his statement provided the “biggest package in generations”.

    He announced a £45billion package to help with the cost of living crisis.

    After this, sterling fell close to $1.03 on Monday, before rising to $1.08.

    Since this time, a blame game has ensued as to why the record low was hit.

    Brexiteer Crispin Odey has insisted the run was caused by Remainers in the City of London who “hate” the Government.

    He told the Telegraph: “I never felt the kind of hate that Friday stirred up for a long time.

    “Amongst lots of friends of mine who are Remainers, they just decided that they hate this Government.

    “Obviously Kwasi they hate now as well, and they think Liz Truss is useless.

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    “They can’t stand poor Jacob Rees-Mogg.”

    The businessman has been criticised over his fund’s decision to bet against sterling.

    But he described the accusations levelled against him as “rubbish”.

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    Mr Odey highlighted that his positions against UK assets were in place for months – long before Mr Kwarteng’s latest statement.

    He said: “My love is grouse shooting. And we are in the middle of [the season] right now.

    “The truth is that I didn’t do anything on Friday. I shot.

    “I haven’t put a trade on for the last two months. I didn’t need to.

    “This was easy to see from miles away and didn’t depend on Kwasi coming into Government or anything else.”

    Guardian columnist Polly Toynbee described his comments as “enjoyable absurdity from grouse-shouting, pound-shorting, hedge funder – blaming Remainers!”.

  • 6 часов, 26 минут назад 28.09.2022Politics
    Economist behind Trussonomics says plan avoids ‘doom loop’ amid dollar rate ‘obsession’

    Liz Truss’s new plan for the economy aims to avoid a “doom loop of weak growth and rising debt” by making targeted borrowing in the short-term when it is in the long-term economic benefit, a key ecoomist who devised it has said. Julian Jessop, one of three financial brains behind so-called Trussonomics, said the focus on economic growth by the new Government would help bring the debt-to-GDP ratio back down.

    Last week, Chancellor Kwasi Kwarteng revealed the Government’s intention to axe the top 45p rate of tax, and cut the lowest rate from 20p to 19p. He also shelved a rise in National Insurance and scrapped the cap on bankers’ bonuses.

    It was hailed by some commentators as a return to conservativism, but the sweeping changes – which came without an accompanying economic forecast – made the markets jittery and saw the pound slump to record lows against the dollar on Monday.

    Ms Truss’s Government was also criticised for the package of economic measures which relied on more borrowing after the pandemic.

    But in an interview with Express.co.uk, Mr Jessop – who was “informally advising” the Truss team in the run-up to her election as PM – said part of the Trussonomics school of thought was that short-term, targeted borrowing could benefit the economy in the long-term.

    He said: “For too long, we’ve been obsessed with borrowing from year to year, rather than what really matters, which is sustainable public finances for the longer-term.

    “We’re talking here about getting debt down as a share of national income over time. And occasionally, that may mean you have to borrow a lot more in the short-term, to secure strong economic recovery.”

    The economics fellow at the Institute of Economic Affairs added: “If we weren’t willing to spend, say, £60billion over the next six months, the outcome would be a deep recession, which would significantly scar the economy – and we’d probably end up spending more anyway because of the need to protect people during a recession and the loss of tax revenue.”

    He believes it is the focus on the short-term financial situation and weak growth that were contributing to the problem.

    Mr Jessop said bringing the debt-to-GDP ratio was not only solvable by lowering the national debt, but also by stimulating growth – an aim which is apparently all four cornerstones of Trussonomics.

    The former Treasury and HSBC adviser explained: “It’s not so much the level of debt that matters; it’s how the debt compares to the size of the economy.

    “So, if you can grow the economy, then you reduce the burden of debt relative to national income. And if part of your strategy for doing that is to borrow a bit more in the short-term, then that is a sensible thing to do.”

    At present, the debt-to-GDP target is set over a rolling three-year period, but Mr Jessop said it should be as long as five years, or over an economic cycle.

    He added: “If you’re trying to get it down in the short-term, then it’s really no different from having an annual borrowing target or something like that. It’s just too short-term. You need a medium to longer-term perspective on the public finances.”

    Mr Jessop continued: “We’re a sovereign nation with our own independent, free-floating currency, [and a] very high credit rating.

    “It’s important we avoid a sort of doom loop of weak growth and rising debt. But you don’t do that by increasing taxes – as Rishi Sunak was planning to do – during a recession.”

    Sterling hit a record low against the dollar of $1.03 on Monday, before settling for most of Tuesday at around $1.08. The Bank of England today signalled a significant interest rate rise to come, but not until the next scheduled announcement in November.

    Mr Jessop said the pound “hasn’t fallen anywhere near as much against a basket of currencies, as it has against the dollar.

    “So even if you’re worried about currencies, it doesn’t make any sense to be obsessed about one particular cross rate – pound against the dollar – you need to think more than that.”

    Mr Jessop said that “the Bank of England is not going to be panicked into raising rates simply on the basis of some extra volatility in the currency markets”.

    He added: “Some currency speculators were hoping for a big rate increase. But we don’t set policy to please currency speculators. If they had raised rates, then I think that could have actually backfired, because it would have been seen as a panicky response and damage the economy.

    “I’m certainly not interested in intraday movements in currency markets. […] No way to run policy is on the back of whether [the] sterling-dollar exchange rate is 1.08 or 1.06 – that’s just bonkers.”

  • 8 часов, 26 минут назад 27.09.2022Politics
    Farage says Liz Truss is ‘betraying Brexit’ with immigration plans that suit ‘big money’

    Nigel Farage has criticised Liz Truss’s plan to boost the economy by allowing more skilled workers into the country, claiming it was a “complete betrayal of what Brexit voters wanted”. The former Brexit campaigner now a TV presenter said earlier that Liz Truss was “doing the bidding of the big money” by providing “cheap labour” from abroad.

    The Prime Minister has insisted she is “unapologetic” in “focusing relentlessly on economic growth”.

    But she and her Chancellor Kwasi Kwarteng have faced a raft of criticism from all sides since the announcement of a new set of economic measures last week, which evoked a sharp, pessimistic reaction from the markets.

    During his speech to the House of Commons, Mr Kwarteng hinted at further reform packages to come, including on the planning system, childcare and immigration.

    In the coming weeks, Ms Truss is expected to expand the Government’s occupation list in order to help businesses fill vacancies by making it easier to recruit overseas workers.

    Labour shortages remain an issue across a number of key sectors, including health and social care, and is said to be the main current concern of employers.

    Businesses have been frustrated the visa system for skilled work has not been responsive enough to shortages they have experienced.

    Downing Street has not denied the plans to reform the visa system, and a spokesperson said the Home Secretary, Suella Braverman, would provide further detail.

    A recent Government report warned such shortages were badly affecting the food and farming sector, often forcing farmers to cull healthy pigs and leave fruit rotting in the fields.

    A Number 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.”

    While any relaxation of immigration rules may resolve the short-term labour shortages, such a move is likely to anger Brexit voters, who saw leaving the EU as an opportunity to grow the domestic labour market instead of relying on foreign workers.

    In a video posted on Twitter this morning, Mr Farage said: “I said I would give Liz Truss every chance as Prime Minister; indeed, I have.

    “Her economic package with Kwasi Kwarteng, ok, the markets may not like it, but at least it’s something conservative for the first time in decades.”

    He claimed that wealthy and influential men had chosen Ms Truss to be the next PM as they believed “she’d be very easy to manipulate”.

    Mr Farage argued that the expected immigration plan “tells you she’s doing the bidding of the big money, because what they want is cheap labour”.

    He added: “Don’t worry about the Brexit promises. Don’t worry about the fact that millions won’t vote for you at the next election. She’s done her bit by the big money.

    “I see this as a complete betrayal of what Brexit voters wanted.”

    But Ms Truss has not shied away from the focus on getting the economy growing again – even if that means implementing unpopular policies.

    According to the Financial Times, the review of immigration rules may also endorse loosening the need for foreign workers to speak English in some sectors.

    Asked about the idea that immigration rules might be relaxed, Mr Kwarteng told the BBC on Sunday: “It’s not about relaxing rules.

    “The whole point about the Brexit debate if we want to go down there was we need to control immigration in a way that works for the UK.”

    He added: “The Home Secretary will make a statement in the next few weeks. But we have to grow this economy.”

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Politics 'New era of Britain': Kwarteng to unleash economic blitz with huge tax cut announcement