A year on, the former PM defends her mini-budget and states the case for lower taxes
Former Prime Minister Liz Truss used a recent speech to call for the end of IR35, which would “cut red tape for small businesses”.
Almost a year on from her mini-budget, Truss insisted that her approach would have helped to grow the UK economy – if given time. She made her comments during a keynote speech at the Institute for Government on Monday 18th September.
Much of the UK’s recent economic instability has been blamed on her mini-budget, which consisted of tax cuts and freezes.
During her speech, however, Truss said that describing her budget as a program of unfunded tax cuts was “not a fair or accurate description”.
Instead, the former PM said she tried to “get the British economy on a better trajectory” through “targeted tax cuts, supply-side reform and spending restraint”.
She insisted that this approach could still work, and called on her successor, Rishi Sunak, to follow this template and deliver tax reforms that would unlock economic growth.
Tax cuts were needed to “cut red tape”
Truss acknowledged that her policies were not universally well received, but said taking unpopular decisions was key to getting the UK economy back on track. “In order to grow, we need to change”, she said, which means “politicians doing the right thing even if it’s unpopular”.
“Reforming our tax system” would make the UK “more business-friendly” and “a more attractive place to invest”, she said. This would “show Britain was open to talent”, Truss added.
Achieving this meant reversing “the impending hike” to Corporation Tax and cutting the top rate of income tax, as well as reforming IR35.
This last measure in particular “would have cut red tape for businesses”, and was widely welcomed at the time.
Truss also suggested that the current tax burden is to blame for low economic productivity, criticising the Treasury and Bank of England, who “underestimate the effect tax and regulation have on people’s behaviour”.
“Levels of tax and regulation are now too high to generate the amount of economic activity we need to help people’s incomes get bigger and to fund government services”, she said.
Dramatic policy shift – but no stability yet
While her policies were considered radical at the time, Truss believes they would have alleviated the protracted economic challenges the UK has faced in the last year. “We can see, from the evidence on the ground, the impact the policies would have had”, she said.
Truss argued that her policies would have led to lower energy bills and greater investment, thanks to “a more competitive rate of corporation tax” and “a boom in the number of self-employed” workers.
However, despite her policies being “welcomed by business groups and voters”, there was a significant and dramatic shift in policy direction following Truss’s resignation, shortly after the mini-budget.
Almost all of the tax cuts and freezes she introduced – many of which would have offered direct benefits for the UK’s self-employed workers – were cancelled by Hunt at the formal Autumn Budget last year.
Despite this, the Prime Minister and his Chancellor have both faced criticism over the last 12 months for failing to get a grip on the UK’s economy. As a result, confidence in government is low, according to recent polling intent.
While Truss put forward a well-articulated argument about the advantages of her policies, her public reappearance generated a mixed reaction.
One former Conservative Party MP, Conor Burns, used the social media platform, X (formerly Twitter), to suggest the “only service she could provide” to the party and government is “sustained silence”.
However, coverage of Truss’s speech in the Financial Times notes that the former PM can “galvanise some quarters” of the Conservative Party. The outlet quoted Sir Jacob Rees-Mogg, who agreed with her, saying: “The government is spending too much and taxing too much”.