Chancellor to plan for ‘new era focused on growth’ in mini budget

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wasi Kwarteng will pledge to “turn the vicious circle of stagnation into a virtuous cycle of growth” as he sets out the new government approach to the UK economy.

The chancellor will announce the tens of billions of pounds of both increased spending and tax cuts in his mini-budget around 9:30 a.m. Friday on Friday, officially known as a “fiscal event”.

The statement is expected to include details on how the government will fund the energy price cap for households and businesses, as well as implement many of Prime Minister Liz Truss’ tax cuts.

The government calls it a “growth plan” of some 30 measures, which comes at a time when the UK is facing a cost of living crisis, recession, soaring inflation and rising interest rates.

We need a new approach for a new era focused on growth

Mr Kwarteng is expected to tell the House of Commons: “Growth is not as high as it should be, which has made it more difficult to pay for public services, forcing taxes to rise.

“This cycle of stagnation has meant that the tax burden is expected to reach its highest level since the late 1940s.

“We are determined to break that cycle. We need a new approach for a new era of growth.”

He will say this will bring in enough revenue to fund public services and enable Britain to compete with other leading economies.

“Thus we will turn the vicious cycle of stagnation into a beneficial cycle of growth,” Mr Kwarteng is expected to say, adding that Mrs Truss’ government “will be “courageous and unabashed in pursuing growth – even if it means difficult decisions to be made”.

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The Chancellor has already confirmed ahead of his mini-budget that the increase in national insurance introduced by Boris Johnson’s government to pay for social care and tackle the backlog of the NHS will be reversed.

He also plans to scrap the planned corporate tax hike from 19% to 25% and remove the cap on banker bonuses as part of wider city deregulation.

It has also been reported that he will cut stamp duties in a further effort to boost growth.

Proposals to accelerate a planned 1-cent cut in income tax and cut VAT across the board from 20% to 15% are also reportedly being considered.

The government is in talks with local authorities in the West Midlands, Tees Valley, Somerset and other regions to establish new investment zones – areas with lower taxes and planning rules, the Chancellor said.

“The time it takes to get approval for nationally important projects is slowing, not faster, as our international competitors make progress. We must put an end to this,” Mr Kwarteng is expected to say.

He also wants new measures to accelerate about 100 major infrastructure projects, including new roads, railways and energy projects, by watering down environmental assessments and other regulations.

In a shakeup of the social security system, Mr. Kwarteng could reportedly announce that 120,000 Universal Credit applicants will have to take active steps to find work or lose benefits.

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A price cap for the next two years of £2,500 on the average household’s annual energy bill was announced by Ms Truss shortly after taking office, with a six-month bill freeze for businesses and other non-domestic users unveiled this week.

Estimates of the cost of the energy package are as high as £150 billion.

Some economists have warned of the surge in government borrowing to fund the plans.

Their choice to finance all this by borrowing… increases the risk and makes UK taxpayers pay more for longer

The Institute for Fiscal Studies said the strategy to boost growth was “a gamble at best” and ministers risked putting public finances on an “unsustainable path”.

Labor also warned of an increased risk, saying the plans followed 12 years of “low growth and plummeting living standards”.

Pat McFadden, shadow chief of the Treasury Department, said: “Conservatives don’t have a new plan for economic growth. They simply went down from leveling and that hasn’t worked in the past.

“Their choice to finance all of this by borrowing and not trying to fund even part of it through a windfall for the energy companies making the most of the current crisis increases the risk and leaves UK taxpayers paying more for longer.

“They’re all doing this at a time when inflation is high and interest and mortgage rates are already rising.”

The Bank of England on Thursday raised interest rates to 2.25% – the highest level in more than 13 years – and said it believes the economy is already in recession.

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Governor Andrew Bailey warned Mr. Kwarteng in a letter that interest rates may need to be raised even further to curb the extra demand from his new tax cuts.

He wrote that the government’s energy price guarantee risked adding to “medium-term inflationary pressures”.

In response, Mr. Kwarteng challenged the central bank to “continue to take the strong measures needed” to curb inflation near double digits.

The Chancellor, who had previously criticized the bank’s track record of controlling inflation, also noted that “not all inflation above the UK target can be attributed to global events and inflationary pressures more domestically controlled”.

Unlike a full budget, which would normally take place in November, Mr Kwarteng will table only a handful of key legislative proposals.

He has come under fire for preventing TNZT Office for Budget Responsibility (OBR) from making the economic forecasts normally published along with a budget, raising charges of avoiding scrutiny.

The lack of OBR data means there will be no independent analysis of whether the announcements violate existing government fiscal rules or their impact on growth.

Earlier this week, Ms Truss said she is willing to be an unpopular prime minister to take measures she believes will help the economy grow.

She admitted that her tax cuts will disproportionately benefit the wealthy, but dismissed claims of unfairness because she bet the growth trickled down to the rest of society.

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