Liz Truss is to urge world leaders to join Britain in introducing sweeping tax cuts despite US President Joe Biden’s disdain for ‘economic fallout’ ahead of their first bilateral talks in New York.
In a speech at the United Nations on Wednesday, the Prime Minister will argue that the free world must prioritize economic growth to prevent authoritarian states like Russia from manipulating the global economy.
However, her embrace of Reaganian economic policy puts her on a collision course with the Democratic president who tweeted yesterday that he was “sick and tired” of the approach, which he said had never worked.
In his latest break from Treasury orthodoxy, Truss pledged on Tuesday to review all tax rates to help struggling households and businesses through the cost of living crisis. The Prime Minister’s remarks pave the way for a radical overhaul of the system which could include a review of income tax brackets and come amid reports that she is planning a reduction in stamp duty as part of her mini- emergency budget on Friday.
In an interview atop the Empire State Building on Tuesday, she told the BBC: “We need to make tough decisions to get our economy back on track. We need to look at our tax rates. Corporate tax must therefore be competitive with other countries so that we can attract this investment.
She had already signaled that further tax cuts, beyond the changes expected on Friday, could be considered. She told reporters on the plane to the United States: “Lower taxes lead to economic growth, there’s no doubt about that in my mind.”
The Times reported that Truss believes the reduction in stamp duty – which brings the Treasury around £12billion a year – would help growth by encouraging more people to move.
Truss’ early talks with Biden come amid tensions over post-Brexit trade deals in Northern Ireland. Despite attempts by the UK to separate the issues, the Biden administration has warned that a free trade deal is unlikely until the row over the Northern Ireland protocol is resolved.
In a move likely to disappoint Brexiters, Truss played down expectations that any trade deal was imminent, saying: ‘There are currently no ongoing negotiations with the United States and I don’t expect ‘they start in the short term’. medium term. »
US national security adviser Jake Sullivan said Biden would use the meeting to “encourage the UK and the European Union to find a workable outcome that ensures there is no threat to fundamental principles. of the Good Friday Agreement”.
The two leaders are also at odds over their approaches to achieving growth, with Truss backing “trickle down” economics during the Tory leadership race, arguing that it was wrong to view all economic policy through the “lens redistribution”.
Biden, meanwhile, tweeted, “I’m sick of the economic fallout. It never worked. We are building an economy from the bottom up and from the middle out.
Yet Truss is expected to make his economic case in his keynote speech at the UN, telling fellow world leaders: “We want people to keep more of the money they earn, because we believe freedom takes precedence over instruction. We are reforming our economy to take Britain forward once again.
“The free world needs this economic strength and resilience to repel authoritarian aggression and win this new era of strategic competition. We will no longer be strategically dependent on those who seek to militarize the global economy.
On a show on Tuesday, Truss admitted that his tax cut plans would initially benefit the wealthy more than the rest of society, but that by reversing a recent National Insurance increase, high earners would benefit around £1,800 a year, and the lowest income around £7.
“I don’t buy this argument that cutting taxes is somehow unfair,” she told Sky News. “What we know is that higher income people generally pay more tax, so when you lower taxes there is often a disproportionate benefit because those people pay more tax in the first place.
“We should base our tax policy on what will help our country succeed. What will generate this economy that benefits everyone in our country. What I don’t buy is the idea that corporate tax cuts don’t help people in general.
Truss, who is also proposing to scrap the cap on bankers’ bonuses, said she was prepared to be an unpopular prime minister to bring in measures she says will grow the economy. “Yes, yes I am,” she said. “What’s important to me is that we develop the UK economy.”
Some Tory MPs believe Chancellor Kwasi Kwarteng could bring forward by a year the pledge made by his predecessor Rishi Sunak when he was Chancellor, to cut income tax by 1% from 2024. as well as a longer term review.
Truss dismissed concerns about the pound’s fall and the general state of the economy. “My belief is that Britain’s economic fundamentals are strong,” she said, dismissing claims that interest rates would rise as a result of her approach.
Earlier, she said higher energy bills were worth paying to keep the UK safe from foreign attackers, but the cost should not be passed on to households.