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Liz Truss U-Turns On Corporation Tax To Claw Back Trust On Economy

Liz Truss U-Turns On Corporation Tax To Claw Back Trust On Economy

Liz Truss announces mini-Budget u-turn (Alamy)

3 min read

Liz Truss has U-turned on her plans to scrap the rise in corporation tax, a major part of her controversial "mini-Budget", after a chaotic morning in which she sacked Chancellor Kwasi Kwarteng.

Truss had been under pressure to make changes to the financial plans ahead of the medium-term fiscal plan due to be announced at the end of this month, following criticism from her own MPs and turmoil in the markets.

Since the "mini-Budget" was announced only two weeks ago, the cost of government borrowing has soared and the value of the pound has plummeted. 

"We need to act now to reassure the markets of our fiscal discipline," Truss told the Downing Street press conference on Friday afternoon. . 

She confirmed she had "decided to keep the increase in corporation tax that was planned by the previous government, this will raise £18 billion per year". 

Truss doubled down on her ambitions for growth and aims to "deliver a low tax, high wage," and said that "global economic conditions are worsening due to the continuation of Putin's appalling war in Ukraine". 

She told reporters: "It is clear that parts of our mini-Budget went further and faster than markets were expecting, so the way we are delivering our mission right now has to change.

"We need to act now to reassure the markets of our fiscal discipline. I have therefore decided to keep the increase in corporation tax that was planned by the previous government."

"I have acted decisively today because my priority is ensuring our country's economic stability," she added. 

This afternoon's Downing Street briefing came after a dramatic morning in which she sacked her former chancellor Kwasi Kwarteng.

Former foreign secretary Jeremy Hunt has replaced Kwarteng as Chancellor, and Chris Philp, former Chief Secretary to the Treasury, has been moved to the Cabinet Office and replaced by Edward Argar. 

In his resignation letter, Kwarteng had said that the economic situation had "changed rapidly" since announcing his mini-Budget in September, including a significant intervention by the Bank of England after the pound tanked and the price of government debt soared. 

"In response, together with the Bank of England and excellent officials at the Treasury we have responded to those events, and I commend my officials for their dedication," he added.

Truss responded by saying that she was “deeply sorry” to lose her long-term political ally Kwarteng from government. 

"We share the same vision for our country and the same firm conviction to go for growth," she wrote.

"You have been Chancellor in extraordinarily challenging times in the face of severe global headwinds."

Truss only took four questions from the media at the end of her statement, and repeated her commitment to deliver "higher growth" when asked why she should remain as Prime Minister, less than six weeks into the job. 

"I'm absolutely determined to see through what I've promised to deliver a higher growth, more prosperous United Kingdom," she said. 

"To see us through the storm we face. We've already delivered the energy price guarantee making sure people aren't paying huge bills this winter. 

"But it was right in the face of the issues that we had that I acted decisively to ensure that we have economic stability." 

 

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