Despite Biden’s disdain, Liz Truss is dealing with the economic downstream

British Prime Minister Liz Truss and US President Joe Biden met officially for the first time at the UN General Assembly in New York after the two leaders clashed over economic policies.

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LONDON – The British government plans to announce sweeping tax cuts for businesses and the wealthy in a controversial mini-budget on Friday, showing how far new Prime Minister Liz Truss is willing to go to reshape Britain’s economic policy, even if it stokes political anger. .

Truss – whose Trusonomics policy stance has been compared to that of his political idols Ronald Reagan and Margaret Thatcher – has said he is willing to cut taxes at the top of the economic spectrum in a strategy to boost UK growth. commonly referred to as trickle-down economics.

But the approach, which comes as Britain faces its worst cost-of-living crisis in decades, has drawn criticism from both the UK’s political opponents and Downing Street’s closest international ally, the US president.

In a tweet Tuesday, Biden said he was “sick and tired of the down economy,” adding that “it has never worked.”

Downing Street said the FT said it was “ridiculous” to think the comment was directed at Truss. The White House did not immediately respond to CNBC’s request for comment.

It came a day before the pair officially met for the first time in New York on Wednesday, after which Truss tweeted that “the UK and the US are staunch allies”.

What is expected from the mini budget?

The UK’s growth-focused mini-budget to be unveiled on Friday by the UK’s new Chancellor of the Exchequer, Kwasi Kwarteng, is expected to include plans to scrap a planned rise in corporation tax, end the cap on bankers’ bonuses and possible cuts. customs duty, tax paid on house purchases.

Kwarteng also confirmed ahead of schedule on Thursday that the government would reverse a recent increase in workers’ income tax, known as national insurance.

I don’t accept the argument that cutting taxes is somehow unfair.

Liz Truss

Prime Minister of the United Kingdom

Critics, including Britain’s opposition Labor Party, have argued that such measures disproportionately benefit the wealthy. Higher earners will get greater relative savings from graduated NI tax than, say, lower earners, while pensioners and benefits will be exempt from the savings.

Still, Truss said on Tuesday he was willing to be unpopular to jump-start the UK economy.

“I don’t accept the argument that the tax cuts are somehow unfair,” he said Sky News.

“We know that people with higher incomes generally pay more in taxes, so tax cuts often benefit disproportionately because those people pay more in taxes,” he added.

More information is also expected on the previously announced cap on energy bills for households and businesses, which have risen since the Russian war in Ukraine.

A ‘critical moment’ for the UK economy.

Nigel Farage says the UK economy is on the brink of a split

“All said and done, we think the government’s spending package could exceed £200 billion over the next two years, throwing out existing fiscal consolidation plans,” he told CNBC by email.

Ryan noted that the government’s fiscal measures could “significantly reduce the chance of a deep and protracted UK recession”, but added that risks remain to elevated inflation and rising UK deficit and net debt levels over the medium term.

The Bank of England announced on Thursday that it is possible that the UK is already in recession.