'Biggest tax cuts since Thatcher' to be made in Kwarteng's mini budget after warnings UK already in recession

23 September 2022, 00:05 | Updated: 23 September 2022, 09:10

Kwasi Kwarteng is set to unveil a package of tax cuts
Kwasi Kwarteng is set to unveil a package of tax cuts. Picture: Alamy

By Will Taylor

The biggest package of tax cuts since Margaret Thatcher will be announced on Friday as Kwasi Kwarteng looks to kick-start Liz Truss's campaign promises.

Listen to this article

Loading audio...

The chancellor will set out his mini-budget later and announce tens of billions in increased spending and tax reductions - while critics warn more spending and lower taxes will lead to heavy amounts of borrowing.

He is set to tell MPs that a "cycle of stagnation" has led to the biggest tax burden Britain has experienced since the 1940s.

Details about how the help with energy bills - a £2,500 annual cap on charges for two years, along with a six-month freeze for businesses - will also be announced, amid criticism that he had would not allow forecasting on his mini-budget by the Office for Budget Responsibility.

And new investment zones will also be set up, creating low-tax and low-regulation areas he believes will boost growth across the UK.

Mr Kwarteng believes his policies will generate enough money to fund public services.

Mr Kwarteng's tax cuts are set to be the biggest since the Thatcher era
Mr Kwarteng's tax cuts are set to be the biggest since the Thatcher era. Picture: Alamy

On Friday LBC's Nick Ferrari grilled Levelling Up Secretary Simon Clarke on the plans and how they will benefit poorer people.

Nick accused the government of being "the same old Tory with the same old story", after reports the government would slash corporation tax and remove the cap on bankers bonuses whilst tightening rules for claiming benefits.

"You're there for the rich but not for the poor," challenged Nick.

"No, we're there to raise living standards and opportunity for everybody," Mr Clarke said.

"My constituents want to see an end to a culture of welfare as much as anybody.

"They believe passionately in hard work and enterprise, and they also recognise that if people are earning more they are paying more in tax, and if they're paying more in tax - and we have a very progressive taxation system in this country - then that is good for the public services on which the poorest and most vulnerable rely."

Nick Ferrari grills Levelling-up Secretary Simon Clarke

Mr Kwarteng is due to tell the House of Commons: "Growth is not as high as it needs to be, which has made it harder to pay for public services, requiring taxes to rise.

"This cycle of stagnation has led to the tax burden being forecast to reach the highest levels since the late 1940s.

"We are determined to break that cycle. We need a new approach for a new era focused on growth."

His speech will come amid a storm of economic problems - soaring inflation, the cost-of-living crisis, and rising interest rates set by the Bank of England after it warned the UK may already be in recession. It raised interest rates by 0.5 per cent to reach highest level since 2008 financial crisis - 2.25% - on Thursday.

Read more: Misery for millions as interest rates hiked 0.5 per cent to reach highest level since 2008 financial crisis

Mr Kwarteng has already confirmed he will reverse the National Insurance hike, cancel the planned corporation tax rise from 19% to 25% and scrap the limit on bankers' bonuses to allow London to compete with international financial hubs.

After Ms Truss said she was willing to be an unpopular Prime Minister if it meant implementing what she believes are the right policies, Mr Kwarteng is to say her Government will be "bold and unashamed in pursuing growth – even where that means taking difficult decisions".

The planned cut of 1p in income tax in 2024 could be brought forward, and VAT could be slashed from 20% to 15%.

Read more: Fracking ban to be lifted in England to 'bolster energy security', govt confirms

Investment zones with lower tax and laxer planning rules could be established after talks with councils in the West Midlands, the Tees Valley and Somerset, among other places.

Measures to speed up about 100 significant infrastructure projects, such as roads, railways and energy-related plans, may include watered down environmental assessments.

Reports also suggest stamp duty could be cut and that some 120,000 people on Universal Credit may need to actively look for work or lose their benefits.

Liz Truss has said she is prepared to be unpopular if it means doing what she believes is right
Liz Truss has said she is prepared to be unpopular if it means doing what she believes is right. Picture: Alamy

Critics fear high spending and lower taxes could lead to heavily increased borrowing.

The Institute for Fiscal Studies said the growth strategy was "a gamble at best", and its director, Paul Johnson, said: "This will actually, we think, be the biggest tax-cutting fiscal event since Nigel Lawson's budget of 1988."

Labour's shadow chief secretary to the Treasury, Pat McFadden, said "The Conservatives don't have a new plan for economic growth. They have simply moved from levelling up to trickle down and that has not worked in the past.

"Their choice to fund all of this through borrowing and not attempt to fund even a proportion of it through a windfall tax on the energy companies making the most from the current crisis increases risk and leaves British taxpayers paying more for longer.

"They are doing all of this at a time when inflation is high and interest and mortgage rates are already on the rise."

Mr Kwarteng has said he will set out a timeline for an independent economic forecast from the Office for Budget Responsibility during Friday's speech.

More Latest News

See more More Latest News

The gas would have to be extracted via fracking

Giant gas field discovered under UK that 'could fuel the country for a decade'

Donald Trump has been accused of 'appeasement'

Ukraine’s future at stake as world leaders gather in Munich - with Trump accused of ‘appeasing’ Putin

Una Crown

Bloody fingernails of murdered widow, 86, help convict killer 12 years after she was stabbed and set on fire at home

President Donald Trump

Donald Trump says he trusts Putin and that Russia should return to G7 - labelling Moscow's expulsion 'a mistake'

Kanye West, left, and Bianca Censori arrive at the 67th annual Grammy Awards on Sunday, Feb. 2, 2025, in Los Angeles. (Photo by Jordan Strauss/Invision/AP)

Kanye West and Bianca Censori 'split' days after Grammys scandal - as rapper releases bizarre message

Near-Earth asteroid, artwork

NASA scientist reveals list of countries that face being hit by huge 'city killer' asteroid the size of Big Ben

'Uncle Sam isn't Uncle Sucker,' US tells Nato - as Ukraine admits it 'won't accept' US-Russia deal without seat at table

'Uncle Sam isn't Uncle Sucker,' US tells Nato - as Zelenskyy says Trump-Putin deal to end war 'must involve Ukraine'

This illustrative image shows Russian President Vladimir Putin (left) and United States President Donald Trump (right).

Donald Trump is 'setting preconditions for withdrawing from NATO', his former advisor tells LBC

Semina Halliwell

Girl, 12, who died of overdose after reporting being raped was 'betrayed' by authorities, mother claims

Farishta Jami, 36, pictured, pledged allegiance to Islamic State and had a 'clear interest in the use of children in warfare'

British mother, 36, who tried to move family to Afghanistan to become ISIS martyrs found guilty of terror offences

Jaysley Beck, 19, was found dead at Larkhill Camp in Wiltshire

Soldier, 19, 'pinned down' by sergeant 'lost faith' after his only punishment was writing apology letter

Michael Steele, who was jailed for life in 1998 for the killings of Tony Tucker, Pat Tate and Craig Rolfe, can be released from prison, the Parole Board has said.

'Essex Boys' killer Michael Steele to be released from prison 27 years after triple gangland murders

Ukraine 'won't accept any agreements' between Trump and Putin to end war without being involved, says Zelenskyy

Ukraine 'won't accept any agreements' between Trump and Putin to end war without being involved, says Zelenskyy

Naya Rivera

Glee star Naya Rivera's heartbreaking final words to her son before she drowned revealed

Kanye West

There can be no debate about Kanye West - he clearly hates Jewish people and should be challenged on it

The young man was swallowed by a whale

Shocking moment whale swallows kayaker whole before spitting him back out