Liz Truss has given her strongest indication that she will scrap the cap on bankers’ bonuses, saying she was prepared to take on “vested interests” in her pursuit of higher economic growth.
The UK prime minister said on Tuesday that she and her chancellor, Kwasi Kwarteng, were prepared to make the argument for controversial policies because “this is about growing the size of the pie”.
Kwarteng will on Friday deliver a tax-cutting mini-Budget with a focus on policies that he claims will nudge Britain’s growth rate up to its pre-financial crash level of 2.5 per cent a year.
Truss declined to discuss the plan to end the EU cap on bankers’ bonuses — which are limited to twice annual salary — but her allies confirmed a Financial Times report last week that an announcement was imminent.
Speaking later on Tuesday, Truss confirmed that Friday’s fiscal event would reverse the rise in national insurance and the planned rise in corporation tax announced by former chancellor Rishi Sunak.
She told the BBC: “I’ll always work to make sure that we are helping those who are struggling . . . that’s why we’re going to take the action on National Insurance, reversing that increase.”
“We have to look at all tax rates. So corporation tax needs to be competitive with other countries so that we can attract that investment.”
Truss admitted, however, that her tax-cutting plans would initially benefit the rich more than the rest of society.
“I don’t accept this argument that cutting taxes is somehow unfair,” she told Sky News. “What we know is people on higher incomes generally pay more tax so when you reduce taxes there is often a disproportionate benefit because those people are paying more taxes in the first place.”
Asked if she was prepared to be unpopular, Truss said: “Yes. Yes, I am.”
She added: “What is important to me is we grow the British economy because that’s what will ultimately deliver higher wages, more investment in towns and cities across the country. That’s what will ultimately deliver more money to people’s pockets.
Labour strategists could barely believe that the new government was considering lifting curbs on bankers’ pay as one of its first economic acts. But they are conscious that Truss will seek to label the opposition party as “anti-growth”.
Kwarteng will also on Friday give more details on how the government’s plan to limit average yearly household energy bills to £2,500 will be funded. Business secretary Jacob Rees-Mogg is expected to offer more insight into a similar scheme for companies on Wednesday.
Truss said that although the government would shield people and business from soaring energy prices, the west had to confront hard choices because “we cannot jeopardise our security for the sake of cheap energy”.
Speaking to journalists ahead of her first overseas trip as prime minister, Truss added: “The western world has become too dependent on authoritarian regimes, not just for our energy supplies but also for other critical minerals and other goods.”
She said that breaking Britain’s dependence on authoritarian regimes was “a price worth paying because our long-term security is paramount”.
Truss claimed the government’s decision to limit bills would cut headline inflation by up to 5 percentage points, adding: “Of course, economic growth will be higher than it would have been if we hadn’t acted because it would have had a debilitating effect on the economy.”
Truss has been forced to put politics on hold during 10 days of national mourning following the death of Queen Elizabeth.
She praised civil servants, the royal household and the armed forces for overseeing the widely praised ceremonial events marking “this very important moment in our nation’s history”.
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