UK: Why Liz Truss Cuts Taxes - Politics

It's amazing that Boris Johnson never came up with this idea, but it's too late now. His great role model, Winston Churchill, visited the Empire State Building in 1932, even though he wasn't prime minister then. A British prime minister has not been there since then. That should change this week. Liz Truss traveled to the UN General Assembly in New York and did as Churchill once did: she stood in front of the cameras in the Empire State Building, with the skyscrapers of Manhattan behind her. Perfect pictures, perfect message, if only it weren't for this tweet from Joe Biden been.

Before the first face-to-face meeting with the new prime minister, the US President announced via Twitter that he was fed up with the so-called trickle-down economy, after all it had never worked before. With trickle-down economics Biden meant an economic policy favored by the Republicans, which assumes that the wealth of the richest will gradually trickle down to the lower classes of society if the wealthy consume and invest extensively.

In America in the 1980s, Ronald Reagan tried to achieve this effect primarily with tax cuts. In Britain, Margaret Thatcher followed suit. And that's exactly what Truss wants to build on again. Very different from Biden. Although his tweet was not aimed at Truss, but at critics in the Republican camp, it became more than clear that the two have a fundamentally different view of what constitutes good economic policy. Quite apart from the fact that the timing of the tweet was extremely unfortunate for Truss, she wanted to use her performance in New York to promote her beliefs on the world stage.

So Truss stood in the Empire State Building and said she was well aware that her tax cut plans would primarily benefit the wealthy. but tax cuts are necessary to achieve what Great Britain now urgently needs: growth. Right now in the energy crisis. When asked if she was prepared to make herself unpopular by doing so, she said, "Yes, I am."

Truss doesn't have much time, in two years the parliament will be re-elected

A head of government who is willing to be unpopular hasn't existed in Britain for a long time. And if you now think of Margaret Thatcher, the Iron Lady, then that should definitely mean Liz Truss be. Unlike her predecessor Boris Johnson, the new prime minister is fundamentally willing to make decisions that are not well received by large sections of the population. She tries to demonstrate a strength and straightforwardness that Johnson almost entirely lacked.

Truss doesn't have much time, a new parliament will be elected in two years. And so it's no wonder that she picks up the pace straight away. After her election as Tory party leader on September 5, she presented a massive aid package three days later to help her compatriots get through the energy crisis. The core of the package is a price cap for electricity and gas. For two years, i.e. until the next election, prices will be frozen at a state-set level in order to relieve the burden on citizens.

The news broke a few hours after Truss presented her package in the House of Commons death of the queen. For the prime minister, this meant that she suddenly had a completely different role. Political activity in Westminster came to a standstill during the ten-day period of mourning. Instead, Truss attended funeral services, had audiences with King Charles III, and read from the Gospel of John at the state ceremony in Westminster Abbey.

After Elizabeth II's funeral, Truss flew to New York. Not only did she meet Biden and other heads of state and government there, she also gave her first speech as prime minister to the UN General Assembly. Truss reiterated her determination to continue supporting Ukraine in the fight against Russia, including with arms. At least on this issue, Truss and Biden agree. In addition to Ukraine and the energy crisis, the 75-minute conversation between the two also addressed the question of why the Northern Ireland dispute between Brussels and London is still simmering. Truss is now reportedly aiming for a solution that everyone can live with by the 25th anniversary of the Good Friday Agreement in April 2023.

Back in London, Truss picked up where she left off at the Empire State Building. On Friday she sat on the green bench in the House of Commons and listened with relish as Finance Minister Kwasi Kwarteng presented the next relief package, called "The Growth Plan"" Growth is not like that high as it should be," said Kwarteng. In order to get out of the "vicious circle of stagnation", taxes are now being reduced on a large scale. From April 2023, the tax rate for annual income over £150,000 is to fall from 45 to 40 per cent; the lower base tax rate will be reduced from 20 to 19 percent. According to economic researchers, these are the largest tax cuts since 1972, with an estimated total volume of £45 billion, or around EUR 51 billion.

The upper limit for banker bonuses should go - to attract banks

Whether the project works is controversial among economists. Critics of the plan warn that inflation could continue to rise because of the tax cuts. The reason: If people spend more money again, consumer demand increases, which in turn leads to higher prices. But the government doesn't want to hear about that. It's all about growth. And so Johnson's proposed corporate tax hike will be scrapped. Social security contributions will also be reduced again. If you buy a house or an apartment, you will have to pay less tax in the future.

And then Kwarteng announced a so-called Brexit benefit: the upper limit for banker bonuses imposed by the EU is to be removed. "We need global banks that create jobs here, invest here and pay taxes here in London, not in Paris, not in Frankfurt and not in New York," said the finance minister.

Economists estimate that all of these relief measures will cost up to £200 billion (230 billion euros). The national debt could therefore rise sharply. In any case, Truss and Kwarteng have been at pains to reassure financial markets this week that Britain's debt is not getting out of hand. On Friday there was at least a first reaction to the government package in London: the pound sterling fell against the US dollar to its lowest level since 1985.

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