Liz Truss admits her tax cuts will disproportionately benefit the rich - and she’s ‘willing to be unpopular’
The Prime Minister confirmed she will be reversing the national insurance hike and axing the planned corporation tax rise
Ms Truss insisted the cost to the taxpayer of her energy package - being paid for by borrowing rather than a windfall tax on the profits of energy and oil giants - is “not what has been projected”, with estimates as high as £150 billion.
The Resolution Foundation think tank has said the PM’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.
“What we know is people on higher incomes generally pay more tax so when you reduce taxes there is often a disproportionate benefit because those people are paying more taxes in the first place.
“We should be setting our tax policy on the basis of what is going to help our country become successful. What is going to deliver that economy that benefits everybody in our country.”
Ms Truss defended any tax changes her government will make at the end of this week, adding that she will do what is needed to get the economy growing again.
She added: “What is important to me is we grow the British economy because that’s what will ultimately deliver higher wages, more investment in towns and cities across the country. That’s what will ultimately deliver more money to people’s pockets.
“In order to get that economic growth, Britain has to be competitive. If we put up taxes, if we have arbitrary taxes on energy companies, if we have high corporation tax, we’re not going to get that investment and growth…”
‘I’ll work to help those struggling’
The Institute for Fiscal Studies says that cancelling the corporation tax rise will cost £17 billion per year, although the think tank acknowledges the figure does not account for how the move might affect investment.
Meanwhile, the financial experts also say the reverse in the national insurance hike will cost £13 billion annually.
However, the Prime Minister said those “difficult decisions” to reverse the national insurance hike and axe the corporation tax rise is the right move to grow the economy, and will ultimately benefit “those who are struggling”.
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.
“We have to look at our tax rates. So corporation tax needs to be competitive with other countries so that we can attract that investment.”
With a general election anticipated in 2024, Ms Truss is gambling that benefits will come from potentially unpopular policies, such as that on bankers’ bonuses.
She said the priorities of voters will be issues such as job opportunity, investment, high street improvement, road building and phone signals at the next general election.