THE UK Government’s long-awaited “mini-budget” will be delivered this week, with experts warning attempts by Liz Truss to repeat the strategies of Margaret Thatcher could fail in the current economic conditions.
Politics is set to return in full force after normal activity was put on hold due to the death of Queen Elizabeth, with MPs returning to the Commons on Wednesday.
Business Secretary Jacob Rees-Mogg is expected to set out further details of the UK Government’s plans to help firms through the energy crisis on the same day.
Chancellor Kwasi Kwarteng’s highly-anticipated mini-budget will take place on Friday, which will deliver tax cuts promised by Truss during her leadership campaign.
The Prime Minister has vowed to cut taxes to boost the economy, including reversing a rise in National Insurance brought in by her predecessor Boris Johnson and abandoning a planned hike in corporation tax due to come into force next year.
Gavin Midgley, senior teaching fellow in accounting at the University of Surrey, said these would benefit high earners more than households which are currently struggling.
“There are a lot of things we don’t know about yet. We don’t know about the energy help for businesses and the [domestic energy] rate cap that we have got in, that is going to help the higher earners.
“The more energy you use, the more you will save and the households that will use more energy will tend to be those that have the majority of the wealth.”
In an article published by The Conversation website, Midgley wrote: “Truss’s idea is based on the principle that a lower tax economy that primarily benefits higher earners will boost economic growth via increased investment and spending, benefitting the majority of people across all income levels.
“This well-established theory is known as supply-side economics, although it’s often referred to by the arguably more loaded term ‘trickle-down economics’.
“This idea is all the more controversial, considering the UK is in the middle of a cost of living crisis.”
He told the Sunday National: “With supply-side economics, it has been successful in the sense that as long as enough people benefit, and then enough people vote for you, then you can still be elected and regarded as a success.
“Which I think was a key part of Thatcher’s reign in that enough people benefited from the political strategy.
“Obviously, whilst it was very divisive, in terms of the sheer numbers, enough people during the 80s were getting enough out of it.”
However, he added: “It seems to be an attempt to repeat that, but there is a question mark over the current economic conditions. We have had a period of austerity, and wages in real terms have not recovered since the financial crash. So whether we are in the right conditions to do that remains unknown.”
It is thought Kwarteng may push ahead with plans to scrap the cap on bankers’ bonuses, which came into force following the financial crisis of 2007-8.
However, the plan sparked a backlash when leaked last week, with criticism it will be introduced at a time when many households are struggling with the rising cost of living.
Earlier this month, John Swinney pledged the Scottish Government will lay out the results of an emergency budget review within two weeks of the UK Government’s “fiscal event”.
The Deputy First Minister warned there has “never been a time of greater pressure” on public finances as he set out savings of £500 million in planned spending in an update to MSPs.
MPs had been due to break for the conference season on Thursday, but will now be asked to sit a day longer to make time for the mini-budget on Friday.
A parliamentary business paper also suggests MPs will consider a motion proposing that the Commons returns from the conference recess early, on October 11.
