Regular readers of these pages know that we have been despondent that seemingly the whole world – led by the US of A – is seemingly sprinting toward big government socialism.
So last week’s decision by British Prime Minister Liz Truss to challenge the reigning orthodoxy by sharply cutting taxes to boost growth is a gutsy and sound policy decision. She also ended a ban on fracking and is deregulating industries.
Here is a summary of the tax plan:
- The government has announced that the planned 1ppt cut to the Basic Rate is to be brought forward by 12 months to next April.
- To allow people to keep more of their money, the Basic Rate of Income Tax will now be cut from 20% to 19% from April 2023, rather than from April 2024.
- To incentivize enterprise and hard work and simplify the tax system, the government has also abolished the Additional Rate of Income Tax.
- From April 2023, there will be a single higher rate of Income Tax of 40 percent, rather than an additional 45% on annual income above £150,000.
By far the most important change is the reduction in the top income tax rate from 45% to 40%. This will bring jobs, capital, and businesses back to the U.K.
CNN’s Jake Tapper asked Truss if her plan could be viewed as fiscally responsible. We LOVED her answer:
“I don’t really accept the premise of the question at all.”
“The UK has one of the lowest levels of debt in the G7, but we have one of the highest levels of taxes. Currently, we have a 70-year high in our tax rates.”
In an op-ed for the Mail on Sunday, Truss went further in calling economic growth the centerpiece of her policies:
“We will be unapologetic in this pursuit. Everything we do will be tested against whether it helps our economy to grow or holds it back…We will usher in a decade of dynamism by focusing relentlessly on economic growth.”
Even more good news is that the architect of this plan is the Chancellor of the Exchequer, Kwasi Kwarteng. He is a protégé of our CTUP co-founder Arthur Laffer. The market fell in response to this decision. It’s a very good bet that these losses will soon translate into gains as investors study the big gains to the British economy and competitiveness from these cuts.