A SUCCESSION of highly respected non-partisan economic experts were this week individually incisive on Prime Minister Liz Truss and Chancellor Kwasi Kwarteng’s unfunded tax cutting plan that would benefit the wealthiest individuals in the United Kingdom most.
“Take all the tax changes coming in over next few years, and, if your income is less than £155,000, you lose. If your income is more than £155,000, you win,” said Paul Johnson, director of the Institute for Fiscal Studies. How much more will £1 million-plus earners get?
“If your income is more than £1m you gain more than £40,000,” he said. The PM’s tax bonanza journey has so far seen the shock sacking of Tom Scholar, permanent secretary to the Treasury under six Chancellors before Mr Kwarteng, the abandoning of timely independent analysis, and a chorus of top economists saying any energy rescue benefits will be obliterated by the household costs the big-picture plan will create.
Ms Truss and Mr Kwarteng still point to their energy announcement that was made a week prior to the mini-budget in response to new questions about their plans on funding tax cuts, their reaction to the fall of the pound, pensions concerns, and the International Monetary Fund and Bank of England’s separate extraordinary interventions.
There was a disastrous series of BBC local radio interviews during which the Prime Minister did not acknowledge any of the above issues.
Sir Mark Carney, the most recent former governor of the Bank of England, said on the BBC that “higher costs of borrowing for everybody undoes the positive impact of any tax reductions or shorter term growth measures”, adding there should be “expert scrutiny” of the plans.
An unusual meeting with the independent Office for Budget Responsibility was hurriedly staged by Downing Street on Friday, but Sir Charlie Bean, an OBR budget responsibility committee member until last December, said the UK Government’s credibility had been undermined, and told Sky News: “I welcome it [Friday’s meeting] happening, but there is an element of it closing the stable door after the horse has bolted.”
There was also a political response. The suggestion by Ms Truss that First Minister Nicola Sturgeon implement similar policies elicited from Ms Sturgeon the tweet: “Hard to know what to say to the suggestion I should mirror policies (tax cuts for richest) that have sunk the £, crashed the mortgage market, pushed pensions to the brink, imperilled public services & forced a Bank of England bailout. What planet is the PM living on?”
Hard to know what to say to the suggestion I should mirror policies (tax cuts for richest) that have sunk the £, crashed the mortgage market, pushed pensions to the brink, imperilled public services & forced a Bank of England bailout. What planet is the PM living on? https://t.co/jx91IIJz4R
— Nicola Sturgeon (@NicolaSturgeon) September 29, 2022
Business editor Ian McConnell pointed to the Tony Blair Institute for Global Change think-tank in his Called to Account column this week, which said: “Our forecast shows that the Chancellor has torn up the fiscal rulebook to boost growth. But even on those narrow terms the plan looks set to fail: the economy will only be 0.4% larger by 2027/28 as a result of the tax cuts announced in the Growth Plan.”
The “Kwarteng tax splurge” was also examined by deputy business editor Scott Wright, who writes: “The Chancellor’s package of sweeping tax cuts, designed specifically to benefit the wealthier in society and to be funded by extensive government borrowing, caused sterling to collapse to a record low against the dollar.”
Business correspondent Kristy Dorsey reports from the energy markets that directors at Edinburgh-based Capricorn Energy have struck a merger deal with Israel’s NewMed, ditching an earlier agreement with Tullow Oil.
Interactive: Pound versus euro/dollar
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