Liz Truss, the candidate to succeed Boris Johnson as prime minister, has pledged to move away from fiscal “traditionalism” and use tax cuts rather than targeted support to cushion the impact of the cost-of-living crisis.
Dubbed “Trussonomics” by the British press, the plan includes reversing the 1.25% increase in the social security rate applied in April, suspending an environmental tax on energy bills and canceling a planned increase in corporate tax from 19% to 25%.
Last week, several newspapers reported that they were also exploring the “nuclear” hypothesis of reducing the 20% VAT rate by 5 percentage points to help the country resist the coming economic and social crisis.
Rival former finance minister Rishi Sunak has warned the strategy is “irresponsible” and many independent economists agree it is dangerous.
The successor to Boris Johnson for the leadership of the Conservative Party and the announcement of the next Prime Minister will be made at 12:30pm on Monday.
The election, conducted by postal ballot among about 180,000 party members, concluded at 5 pm on Friday.
Paul Johnson, director of the Institute of Fiscal Studies, agreed that the tax cuts could help Britons and stimulate the economy, but they would have an impact on tax revenues and consequently the public accounts.
“Unless there is more money, runaway inflation will impose another austerity on our public services,” he warned in an article for The Times.
Since the 2007 global financial crisis, the UK has adopted a policy of “fiscal responsibility” to keep public debt at stable values and on a downward path, but additional spending from the Covid-19 pandemic has led to a budget ‘hole’. tall..
Consultant Pantheon Macroeconomics has forecast that a combination of additional support measures, rising inflation and a slowdown will push public debt to £170bn this year, against the £99bn forecast by the Office for Budget Responsibility. Budget responsibility).
Bank of England Governor Andrew Bailey warned in early August of the country’s risk of ‘stagnation’, meaning recession or economic stagnation with high inflation.
The inflation rate is already at 10.1% and the central bank expects it to reach 13% in October.
But Liz Truss believes the situation is “inevitable” and called for more “ambition” to evoke Margaret Thatcher’s spirit of reform.
Sunak called on Thatcher and former finance minister Nigel Lawson to criticize the borrowing as “unconservative” and argued that controlling inflation should be the priority.
The British press is likely to pick current Economy Minister Kwasi Kwarteng for the finance portfolio, while Thatcher’s adviser, M.P. John Redwood may return to government.
Details should be known next week and an extraordinary budget is scheduled for September 21.
On Tuesday, Prime Minister Boris Johnson is expected to hand in his resignation to Queen Elizabeth II, which will be held at Balmoral Castle in northern Scotland instead of Buckingham Palace in London for the first time in her 70-year reign.
The 96-year-old monarch has been aggrieved by mobility issues that have led her to miss several events this year and deputize for her heirs, particularly her eldest son Prince Charles.
Johnson’s successor, the 15th head of government of Elizabeth II’s reign, will be welcomed by the monarch in Scotland on Tuesday, who will then appoint a new prime minister (or prime minister). Leader of the party with parliamentary majority.
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