Truss Economy: No Windfall Tax; Public Borrowing and a Tax Cut for ‘Investment’?

Making her debut speech in PMQ today, Prime Minister Liz Truss confirmed that she is not in favour of implementing Windfall Tax on Energy companies (thereby overturning a previous promise made by Rishi Sunak whilst he was Chancellor); preferring instead to borrow up to an estimated £100bn to subsidize the energy companies to fix a cap at £2000.00 for domestic energy customers.

This borrowing will inevitably be placed on those same consumers to repay in the future. She also plans to see greater corporation tax cuts and tax cuts that appear to benefit the higher income tax payers in reality. She believes that by cutting taxes this will spur economic growth, although it seems if one thing the country is in dire need of are companies and people to actually ‘invest’ (by paying fair taxes into Britain’s economy) rather than seeing Britain as a low wage paying tax haven.

Liz Truss says she will bolster the NHS and “deal hands on” with the energy crisis but seems more determined to lower taxes and offered few details about how she would implement those policies. She is expected to unveil her energy plans on Thursday

“We shouldn’t be daunted by the challenges we face,” Truss said in her first speech as prime minister. “As strong as the storm may be, I know the British people are stronger.”

It’s believed that on her first day Liz Truss spoke with Ukrainian President Volodymyr Zelensky and U.S. President Joe Biden.

Zelensky wrote on Twitter: “I was the first among foreign leaders to have a conversation with the newly elected British Prime Minister, Liz Truss. I invited her to Ukraine. I thanked the people of Britain for their leadership in the military and economic support of Ukraine.”

Biden, who worked closely with Johnson in confronting Russia’s invasion of Ukraine, was quick to congratulate Truss.

“I look forward to deepening the special relationship between our countries and working in close cooperation on global challenges, including continued support for Ukraine as it defends itself against Russian aggression,” he said on Twitter.

Liz Truss’ office confirmed that she discussed the Ukraine war and defence cooperation with President Biden, as well as economic issues and maintaining the British-Irish Good Friday Agreement. They are expected to meet in person at the U.N. General Assembly meeting in New York later in September.

Boris Johnson leaving his position as Prime Minister, yesterday in his farewell speech described himself as “like one of those booster rockets that has fulfilled its function.” Commenting on his future plans he added “I will now be gently re-entering the atmosphere and splashing down invisibly in some remote and obscure corner of the Pacific”.

The British electorate are still wondering about Liz Truss, a one-time accountant who previously was a Young Lib Dem supporter and entered politics in 2010, and her capability in dealing with the economic crisis that has evolved during her time in Government over the last 12 years of Conservative Government.

Truss is under pressure to spell out how she plans to help consumers pay household energy bills that are set to rise to an average of £3,500 pounds a year, triple the cost of a year ago, on Oct. 1.
She also will have to deal with Rising food and energy prices, driven by the invasion of Ukraine and the aftershocks of COVID-19 and Brexit, have propelled U.K. inflation above 10% for the first time in four decades. The Bank of England forecasts it will hit 13.3% in October and some financial experts warn that this may increase to 15% , and that the U.K. will slip into a prolonged recession by the end of the year.

Low wages in the country are now seeing Train drivers, port staff, garbage collectors, postal workers and lawyers have all staging strikes demanding a pay increases that’s in line with inflation, and millions more, from teachers to nurses, could walk out in the next few months.

In theory, Truss has time to make her mark: She doesn’t have to call a national election until late 2024. But opinion polls already give the main opposition Labour Party a steady lead, and the worse the economy gets, the more pressure will grow.

In terms of foreign policy its known that Truss, was a firm supporter of Ukraine’s resistance to Russia. However, she was less intellectually astute when commenting on French President Emmanuel Macron, where she displayed a complete lack of diplomacy with her “Jury’s Out” comment (his response showing a greater degree of maturity) at a time when it’s more than ever important to further EU relations, than disrespecting the French President.

We also know that Truss has also pledged to increase U.K. defence spending to 3% of gross domestic product from just over 2% — which is another expensive promise, however the concern for most people will be how she will assist the normal working person, and those vulnerable in society who are facing crippling bills and who are presently going to foodbanks and choosing whether to eat or heat.