Prime minister Liz Truss and Chancellor Kwasi Kwarteng will deliver a 'mini budget' on Friday morning to set out the government's plans to tackle the soaring cost of living.
Ms Truss has previously pledged to hold an "emergency budget" within weeks of becoming leader of the Conservative Party, however, plans were forced to wait in light of Queen Elizabeth II's death. Friday's 'mini budget' will not hold the same weight and significance as a full Budget - meaning it will likely emit any changes to duties on cigarettes, alcohol, and fuel.
The mini budget will also not include independent growth forecasts which would reveal more on the prime minister's spending plans. Instead, it will focus on the tax cuts she promised in the leadership contest while also providing some details on how Truss' government will fund the energy bill freeze that was announced last month, the Mirror reports.
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It comes as Ms Truss admitted she is willing to be an unpopular prime minister to bring in measures she believes will grow the economy, and that her tax cuts will disproportionately benefit the rich. Ms Truss has confirmed she will be reversing the national insurance hike and axing the planned increase to corporation tax.
The government is making sure to avoid the term Budget for Friday's event because it will mean there will be no requirement for the Office for Budget Responsibility to produce forecasts of how the plans will affect public spending and borrowing. However, it has been reported that Ms Truss will borrow as much as £150 billion to fund the two-year energy bill freeze she previously announced. Ms Truss has said the cost to the taxpayer is “not what has been projected”.
The Resolution Foundation think tank has said Ms Truss’s tax plans and energy support will see Britain’s richest households getting twice as much support with living costs as the poorest households. Ms Truss accepted the benefits would fall in favour of the rich – at least initially – but rejected claims of unfairness as she bet on growth trickling down to the rest of society.
Pauls Johnson, director of the Institute for Fiscal Studies, noted earlier this week that OBR forecasts published in March are now "hopelessly out of date". Further details are expected to be released tomorrow on support for businesses during the energy bill freeze after the government failed to set out any concrete specifics.
Here's a breakdown of what you can expect form Friday's mini budget
Tax cuts
One of Truss' major promises during the leadership campaign was to severely cut taxes which the Chancellor will likely announce on Friday. Ms Truss has pledged to reverse April's 1.25 percentage point increase in national insurance.
Speaking to the BBC on Monday, she said: “I’ll always work to make sure that we are helping those who are struggling. That’s why we took the action that we took on energy bills because we didn’t want to see households facing unaffordable bills.
“And that’s why we’re going to take the action on national insurance, reversing that increase as well. So, yes, we do have to take difficult decisions to get our economy right."
She also vowed to cancel the former Chancellor's planned rise in corporation tax from 19 per cent to 25 per cent in April 2023.
Green energy levy
The prime minister has pledged to scrap the green energy levy on bills in an attempt to bring down costs for vulnerable households. IFS director Paul Johnson described the policy as "somewhere between meaningless and pointless," noting that households may only save around £11 over the next three months.
Focus on growth
The chancellor reportedly told Treasury officials that they needed to focus "entirely on growth". The Financial Times reported that Mr Kwarteng told them they needed to focus on a 2.5 per cent rise in growth - the average before the financial crash in 2008.
Bonuses for bankers
Bankers may receive unlimited bonuses with the government reportedly considering scrapping a cap on bonuses - currently capped at twice the employee's salary. Banking chiefs have reportedly complained that the cap is driving up salaries and making the UK less attractive than the US or Asia.
Special investment zones
Reports suggest that the government will announce "special investment zones" in up to 12 UK areas. In these zones, personal taxes could be cut alongside affordable housing quotas, and environmental pledges.
It is not yet clear where these zones will be situated.
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