Liz Truss: A new Prime Minister with a 'bold plan'

Her victory comes at a time when the nation faces the hard reality of the economic challenges ahead with the country gripped by a cost-of-living crisis which is likely to leave many businesses struggling to pay their energy bills this winter. 

Ms Truss announced a package of support in relation to the energy crisis on Thursday 8 September and an emergency Budget is anticipated later this month, in which Chancellor Kwasi Kwarteng will set out measures aiming to bolster the economy amid sustained low growth, soaring inflation, flat-lining wages and the very real prospect of recession.

The new Prime Minister promised a wave of new measures to tackle the cost-of-living crisis and boost growth. These new measures will be based on a principle of “tax cuts from day one”, in contrast to the approach that defined the support during the Coronavirus pandemic.

Based on her campaign for the leadership, we can expect the following tax announcements: 

• scrapping the planned corporation tax increase to 25% (keeping it at 19%) 
• reversing the national insurance increase of 1.25% 
• suspending the green energy levies on energy bills 

The other main fiscal policy that Ms Truss is reported to be considering is slashing VAT – this could be a reduction of the rate by between 5% and 10% (to between 15% and 10%). Whether reverses to recent increases represent genuine cuts or simply reversion to the previous (still high) tax regime is a point for debate. She has also ruled out any new taxes, including a windfall tax on energy companies. 

Other mooted economic policies include a shake-up of City regulations, Investment Zones which will be low-tax and low-regulation areas across the country, and what have been called “Truss Towns”, which will be the 21^st-century versions of new model towns such as Bournville and Saltaire. 

Critics of Ms Truss say her tax cuts may lead to further inflation and rises in interest rates, alongside increased borrowing to fund day-to-day expenses, which breaks the manifesto pledge to borrow only to invest. Only time will tell.  

Our Chief Economist, George Lagarias, shares his view on the proposed policies here. 

Our tax experts will be sharing their thoughts on the announcements ahead of the expected Budget. You can follow our analysis on this page or on our LinkedIn page.