What will Liz Truss do to ease the cost of living crisis for households and businesses? | Business newsletter

Liz Truss herself said dealing with the cost of living crisis was her number one priority once she got the keys to Number 10.

She victory over Rishi Sunak In the race for Tory leadership that follows an intense five-week debate, dominated by how each will approach bill reductions for households and businesses.

Following criticism that the government had been reckless in the face of soaring inflation and warnings of a coming recession, Ms Truss promised on Sunday that she would unveil an energy bill action plan. yourself within a week.

Here Sky News looks at what could lead to, the broader measures expected to follow and the cost of all that support for public finances.

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Recession is “inevitable”.

It was a remark made by Ms Truss at the start of her push to become prime minister, which stood out from the initially hopeful crowd.

With annual inflation at more than 10%, consumer spending, the main driver of the UK economy, is slowing while a growing number of companies fear their costs will force them to stop business.

The biggest driver of inflation in the UK (and elsewhere in Europe) is the cost of raw energy soars due to Russia’s war in Ukraine.

This is where Ms. Truss will place her initial focus.

Energy bill

It was announced last week that energy price limitincluding the vast majority of households, will increase to an average annual total of £3,549 from October and there is speculation that this amount could exceed £5,000 next year.

Businesses that are not within the price limit have had to swallow the high cost of gas and electricity much earlier.

That means those extra bills have been moved down the supply chain, fueling the problem of further inflation, but also raising fears that unsustainable prices will eventually force companies out of business. and unemployment increased.

Ms. Truss has been tight-lipped about her plan to help lower energy prices, but speculation is growing that it will take the form of a freeze in energy prices.

She has promised additional support in addition to the £37 billion in cost-of-living support the government announced so far, which sees the poorest households guaranteed up to £1,200, with a £400 allowance for all homes.

The aid could come in the form of additional grants but there are increasing reports that the Treasury will fund a price ceiling freeze.

The Times has stated that the size of the support could be on par with the £70 billion COVID-19 cost plan.

A senior Truss ally told Sky News that “shock and amazement“announcement can be expected; signaling a larger package than people are currently expecting – adding weight to the prospect of a bill freeze.

Remember: Labour’s plan to freeze bills has been criticized by Camp Truss.

For businesses, there has been talk of cutting business rates to help save energy costs, but Ms. Truss did not mention the bar specifically excluding further taxes on businesses. big oil company.

In addition to addressing the immediate issue of bill increases, her energy plan to be launched this week is also expected to contain information on how the UK will boost its energy security. me.

Spending cuts?

Ms. Truss has clearly ruled out cutting public spending to save money.

Tax cuts

We are unlikely to get any details on Truss’ stimulus plan until the Budget in late fall, but she has promised a “bold” plan to cut taxes and boost growth. boost growth.

Her idea of ​​tax cuts to stimulate spending is perhaps the most divisive issue in the leadership race.

Mr. Sunak, the former prime minister, said that corrupting tax receipts before inflation was under control would prove “regressive” and only add to inflation.

But Mrs. Truss considered a cut VAT up 15% to help both consumers and businesses, according to Sky News sources, in a move that could hurt revenue by £38 billion a year, according to the IFS think-tank.

She will also likely extend the fuel tax cut at the end of March.

According to The Sunday Times, Ms. Truss’ team is also considering raising the personal tax-free allowance, raising the level of taxpayers to 40% and cutting the basic tax rate to less than 20%.

One possible measure – which looks likely to get more done because of campaign pledges – is to reverse the recent rise of National Insurance to help fund social care and the public’s backlogs. NHS.

Such a move would benefit the highest earners more and is seen by critics as increasing income inequality.

Ms Truss is also expected to rescind another measure from the Sunak era – which is expected to raise the corporate tax rate from 19% to 25% next April – over concerns it will affect Wang’s competitiveness. UK after Brexit.

What is the cost of public finance?

None of these measures are in place, but it is clear that if all of them are implemented the short-term costs to public finances could easily amount to £100 billion but that is just a number. purely speculative.

It is based on the assumption that energy bills are frozen this winter, VAT is cut, corporation tax increases are canceled and business tax rates are cut.

With the UK’s national debt close to £2.4 million, can the government be able to afford these measures following the unprecedented support given during the pandemic, at the cost of settling the bill? Is that debt high?

Given the size of the prices faced by households and businesses, all parties agree it would be irresponsible not to offer assistance. The debate focused on who would benefit.