KWASI Kwarteng is set to announce tens of billions of pounds of tax cuts and new spending in a mini budget on Friday morning.
The Chancellor's statement - described as a "fiscal event" - is expected to include details of how the Government will fund the energy price cap for households and businesses, and put into practice many of Prime Minister Liz Truss’s tax-slashing promises.
The Government is dubbing it a “growth plan” of some 30 measures, which comes at a time when the UK faces a cost-of-living crisis, recession, soaring inflation and climbing interest rates.
Kwarteng is expected 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.”
He will say that this will deliver enough revenue to fund public services, and allow Britain to compete with other leading economies.
“That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth,” Kwarteng is expected to say, adding that Truss’s administration will be “bold and unashamed in pursuing growth – even where that means taking difficult decisions”.
The statement will be shown on Parliament TV from 9.30am.
What do we know about the statement already?
The Chancellor already confirmed ahead of his mini-budget that the National Insurance hike introduced by Boris Johnson’s government to pay for social care and tackling the NHS backlog will be reversed.
He is also set to axe the planned increase in corporation tax from 19% to 25%, and scrap the cap on bankers’ bonuses as part of wider City deregulation.
It has also been reported that he will cut stamp duty in a further attempt to drive growth.
Proposals to fast-track a scheduled 1p cut to income tax and to slash VAT from 20% to 15% across the board are reportedly also 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 taxation and planning rules, the Chancellor is to announce.
He also wants new measures to speed up around 100 major infrastructure projects, including new roads, railways and energy projects, by watering down environmental assessments and other regulations.
In a shake-up of the welfare system, Kwarteng could reportedly announce that 120,000 Universal Credit claimants will have to take active steps to find work or lose benefits.
A price cap for the next two years of £2500 on the average household’s annual energy bill was announced by Truss shortly after she took office, with a six-month freeze on bills 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 about the sharp rise in Government borrowing to fund the plans.
The Institute for Fiscal Studies said the strategy to drive growth was “a gamble at best” and that ministers risked putting the public finances on an “unsustainable path”.
The Bank of England on Thursday hiked interest rates to 2.25% – their highest in more than 13 years – and indicated it believes the economy is already in recession.
Governor Andrew Bailey warned Kwarteng in a letter that interest rates might have to be raised even further to curb the extra demand caused by his new tax cuts.
He wrote that the Government’s energy price guarantee risked adding to “inflationary pressures in the medium term”.
In response, Kwarteng challenged the central bank to “continue to take the forceful action necessary” to rein in near-double digit inflation.
The Chancellor, who has previously criticised the bank’s record on containing inflation, also noted that “not all of the UK’s above target inflation can be attributed to global events and that inflationary pressures are becoming more domestically driven”.
Unlike a full budget, which would typically be held in November, Kwarteng will only put forward a handful of major legislative proposals.
He has come under fire for preventing the independent Office for Budget Responsibility (OBR) from making the economic forecasts usually published alongside a budget, sparking accusations that he is avoiding scrutiny.
The lack of OBR data means there will be no independent analysis of whether the announcements breach the Government’s existing budget rules or their impact on growth.
What are the SNP saying?
Ahead of the announcement, the SNP’s shadow chancellor Alison Thewliss called on the Chancellor to introduce a real freeze on energy bills and provide more help for families and small businesses, arguing that current measures don’t go far enough.
She also called on the Government to introduce a windfall tax to fund the energy bill price controls – rather than asking the taxpayer to foot the bill.
"Scotland is an energy-rich country but we are being forced to pay the price for Westminster failure as Tory cuts, Brexit damage and economic mismanagement make the UK cost of living crisis much worse than it needed to be,” she said.
"Instead of wasting billions of pounds of taxpayers' money in tax breaks for the rich and big business, the UK government must focus on ordinary families - with targeted support for low and middle income households and small businesses.
"This must include reversing Tory cuts to Universal Credit, introducing a Real Living Wage, scrapping the benefit cap and emulating the progressive approach of the SNP government's Scottish Child Payment.
"And instead of forcing taxpayers' to foot the bill for an energy company bail out, the UK government must introduce a windfall tax on excess profits so multi-billion pound companies pay their fair share.”
She went on: "Current Tory plans do not go anywhere near far enough - and it is shameful that they will benefit big corporations and rich Tory donors at the expense of ordinary families.”
