Liz Truss has pledged to review all tax rates to help families and businesses struggling through the cost of living crisis, in her latest departure from the Treasury’s orthodoxy.
The prime minister’s remarks, on her first foreign trip to the United States, pave the way for a radical reform of the system that could include looking again at income tax categories.
In an interview on top of the Empire State Building on Tuesday, she told the BBC: “We have to look at our tax rates. So corporate tax has to be competitive with other countries so we can attract that investment.”
Truss indicated overnight that more tax cuts may be on the way as she strives to boost economic growth in the face of the UK’s biggest economic storm in a generation.
The “first thing” she wanted to present was economic growth, she told reporters on the plane to the United States, adding: “Low taxes lead to economic growth, there’s no doubt about that in my mind.”
Prime Minister Reagan embraced Reagan’s “incremental” approach to economics throughout the Conservative leadership contest, arguing that it was wrong to view economic policy through a “redistributive lens.”
However, it does put her on a collision course with Joe Biden, whom she will meet for bilateral talks on Wednesday. The US president wrote on Twitter: “I’m sick and tired of the fallout from the economy. It never worked. We’re building an economy from the bottom up and in the middle.”
On a radio tour on Tuesday, the prime minister defended her plan to cut National Insurance, which has drawn criticism for benefiting the highest earners 250 times more than the poorest, acknowledging that it was of more value to the wealthy.
She told Sky News: “I don’t accept this argument that tax cuts are somehow unfair. What we do know is that people with higher incomes generally pay more taxes, so when you do tax cuts there is often a disproportionate benefit because These people pay more taxes in the first place.
We must base our tax policy on what will help our country succeed. What will bring about this economy that will benefit everyone in our country. What I don’t accept is the idea that corporate tax cuts don’t help people in general.”
Truss also confirmed that it would reverse the increase in National Insurance and cancel a corporate tax increase planned in a mini-budget on Friday, which may have to bend fiscal rules to reduce debt.
Some Conservative MPs believe the chancellor, Kwasi Kwarting, could deliver for a year the pledge made by his predecessor Rishi Sunak to cut income tax by 1% from 2024.
Business groups expect business price changes and value-added tax cuts to help with the energy crisis, as well as a long-term review of these taxes. Kwarteng is also expected to announce that the cap on banker bonuses will be eliminated.
Truss told Sky News she would be willing to be an unpopular prime minister to take measures she believes would help the economy. “Yes, yes I am,” she said. “What interests me is that we grow the British economy.”
It ignored concerns about the falling pound and the state of the economy. “I think the economic fundamentals of Britain are strong,” she told the BBC. “We have relatively low debt compared to the rest of the G7 countries.”
She added: “What I am looking at is getting these economic fundamentals right and what the Chancellor of the Exchequer will outline on Friday is his approach showing that we are fiscally responsible, and we will implement our policies in a fiscally responsible manner. We will help make the UK more competitive and more successful.”