Kwarteng to announce £30bn tax cuts in mini budget – reports | Economic policy

Kwasi Kwarteng is preparing to announce £30billion in tax cuts in a bid to ease pressure from the cost of living crisis and boost economic growth, according to reports.

It is believed the Chancellor will present plans to reverse the recent National Insurance increase and freeze corporation tax in an emergency mini-budget on Friday.

However, the tax cuts could violate the fiscal rule that requires the national debt to decline as a proportion of national income between 2024 and 25.

Kwarteng is likely to extend the target beyond until the next parliament to try to deal with the “economic shocks” felt by the country, according to the Times.

The newly appointed Chancellor is also expected to announce controversial plans to scrap caps on bankers’ bonuses when next week’s financial statements.

Kwarteng’s mini budget will come at the end of what was expected to be a rocky return to politics after the Queen’s funeral on Monday. Business Secretary Jacob Rees-Mogg is expected to give more details of the government’s plans to help businesses through the energy crisis. And Health Secretary and Deputy First Minister Therese Coffey is due to present her vision on Thursday for getting the NHS through the winter months.

“If we have the £30 billion in tax cuts and we know the economy is doing worse than it was, they might just change the rules,” said Paul Johnson, director of the Institute for Fiscal Studies.

“When you have a slowing economy and you cut taxes, that’s clearly going to lead to more government borrowing and therefore more debt, increasing the risk that you’ll break fiscal rules.”

The Chancellor’s tax cuts follow the Government’s announcement of a £150billion energy cap to help meet the cost of rising bills, freezing energy bills at an average of £2,500 per year for two years.

It will replace the current Ofgem energy price cap of £3,549 and include the temporary removal of green levies worth around £150.

“Kwarteng’s mini-budget will be defined by an unprecedented energy support package for households and businesses in a significantly weaker macroeconomic environment,” said Sanjay Raja, senior economist for Deutsche Bank.

“Combined with unfunded tax cuts, our base case is one of a significant deterioration in public finances.”

Any changes to fiscal rules will be confirmed in the full budget, due in November.

During the Tory leadership race, Liz Truss insisted her budget plans would cost £30billion when economists estimated the true figure was considerably higher.

She suggested she would scrap the planned corporation tax hike despite being warned that a failure to balance the pounds risked inflation, higher interest rates and a falling pound free.

His team had also spoken to business groups about corporate rate reforms and VAT cuts to help tackle the energy crisis, as well as a longer-term review of these taxes. .

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