Focus on growth, Chancellor tells Treasury

The Prime Minister Liz Truss campaigned on a return to the Conservatives’ economic growth target of 2.5%, which hasn’t been consistently hit since before the financial crisis of 2008. 

This comes as an ‘emergency fiscal event’ is expected late next week, following official mourning for the Queen’s death.

The ‘fiscal event’ is not being referred to as an emergency budget, meaning it won’t be treated as such, nor subject to protocol traditionally surrounding budgetary announcements. Office for Budget Responsibility (OBR) have not received requests to provide the economic forecasts that would traditionally accompany a budget such as this.

The ‘fiscal event’ is expected to include a reversal of April’s national insurance rise and commit to not increasing corporation tax from 19% to 25% next year.

These two policies alone would usher in £30bn in tax-cuts, more than 1% of national income. This would annually put £1,800 back in the pockets of Britain’s highest earners, with £7 going back to the lowest.

The Labour Party have stated their belief that a 1% cut in the basic rate of income tax will be brought forward, first promised by Rishi Sunak, it is due to take effect in April 2024.

These measures will follow a package announced by Liz Truss last week to lessen the impact of rising energy prices on households and businesses, prompting fears of increased government borrowing. Net borrowing was at £15.8bn (2.6% GDP) in Q1 2022.

This comes as Kwarteng, on his first day as Chancellor, sacked the permanent secretary for the Treasury, Tom Scholar. Scholar was popular within the Treasury, seen as highly experienced dealing with financial crises. The move has reportedly sent ripples throughout Whitehall.

In a call, Kwarteng told civil servants that Scholar had led “an excellent finance ministry”, alluding to the department’s commitment to keeping a tight leash on spending. Kwarteng now believes it is the time to “focus on growth”, as the cost-of-living crisis bites into UK household funds.

Kwarteng argued that by returning annual growth to 2.5% Britain would be better able to bear down on its budget deficit in the medium term.

He assured the Treasury that Scholar’s sacking would not be followed by further changes in leadership.