Liz Truss has signalled 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 faced in a generation.
In the mini-budget on Friday, the government is planning to cut national insurance and ditch a planned corporation tax rise as it attempts to reduce a record tax burden.
Kwasi Kwarteng, the new chancellor, is expected to announce the creation of a network of low-tax, low-regulation investment zones, and there could be changes to business rates.
However, Truss’s remarks before this week’s emergency “fiscal event” suggest she could be prepared to go further still in the months ahead, with a full budget expected in November.
She told reporters that the “number one thing” she wanted to deliver was economic growth, adding: “Lower taxes lead to economic growth, there is no doubt in my mind about that.”
She said: “Having the highest taxes in 70 years and putting up corporation tax at a time when we’re trying to attract investment to this country isn’t going to deliver growth. We need to be competitive.”
Truss appeared to defend controversial plans, expected to be confirmed on Friday, to scrap a cap on bankers’ bonuses, admitting: “Not every measure will be popular.”
She said: “There are always vested interests, people who oppose measures that increase economic growth, but what is important to me, what is important to the chancellor, is that people have more opportunities, there is more investment, there are jobs with higher wages. We are prepared to make that argument. This is about growing the size of the pie.”
The prime minister conceded there were “other measures” the government had to take to spur economic growth, such as investing in projects like broadband.
However, she has clearly prioritised tax cuts as a means of boosting productivity, even though economists have argued the government should also concentrate on infrastructure, investment, skills and wages.
Truss said she was willing to make the argument that pursuing growth should be her single biggest priority, when asked if she was taking a massive gamble with the economy.
“The number one thing we need to deliver as a government, and in fact as a country, is economic growth,” she said. “Since the financial crisis we have seen relatively low levels of economic growth and without economic growth we cannot deliver better lives for people, whether it’s higher wages or money able to go into public services like the NHS or the education service.”
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Asked what she was planning to do to help struggling families in her mini-budget, she replied: “What is important is what makes Britain more competitive.”
Truss said she wanted to deliver a higher wage economy, with the average worker currently earning about £9,000 a year less as a result of more than a decade of stagnation.
Some Tory MPs believe Kwarteng could even bring forward by a year the pledge made by his predecessor Rishi Sunak when chancellor, to cut income tax by 1% from 2024.
Truss’s team has also spoken to business groups about changes to business rates and cuts to VAT to help with the energy crisis, as well as a longer-term review of these taxes.