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New Prime Minister urged to restore growth

Author: ICAEW Insights

Published: 05 Sep 2022

Against a backdrop of stagnating wages, rising interest rates and inflation, new UK Prime Minister Liz Truss faces huge expectations about the strategies she will employ to tackle the cost-of-living crisis.

Truss was elected with 57.4% of the vote, representing the lowest margin of any Conservative leader, and will take the keys to Number 10 at a time of economic uncertainty and with the UK facing the worst economic situation since the 2008 financial crash.

Shortly after the announcement of her appointment as leader of the Conservative Party, Truss took to Twitter to pledge “bold action to get all of us through these tough times, grow our economy, and unleash the United Kingdom’s potential”.

Truss has said she will act quickly on the unfurling energy crisis with speculation rife that a freeze on energy bills may be forthcoming. Speaking on the BBC on Sunday, Truss promised an announcement on how to help people with bills within her first week in No 10 if elected, although she declined again to give any details.

Liz Truss has not ruled out direct support, but says her “priority” will be tax cuts, specifically a “one-year temporary moratorium on the Green Energy Levy”.

While she has claimed that this moratorium would cut £153 from energy bills, the Institute for Fiscal Studies says much is still unclear about this proposal. “Indeed, there is no single ‘green energy levy’. Rather, there is a patchwork of different policies that increase energy costs for households and businesses,” the IFS says. 

Revenue from these levies subsidises the generation of renewable electricity, funds the installation of home insulation and provides energy bill discounts to vulnerable customers. Other levies apply only to businesses’ use of electricity.

Michael Izza, ICAEW Chief Executive, said celebrations for Truss’s leadership contest victory would be short-lived, as urgent action is needed to provide targeted support for struggling businesses and households this winter, and to inject growth into the economy. 

“Our members will play a key role in helping the millions of businesses they advise to navigate the unprecedented economic challenges that lie ahead. We look forward to working with the new Government to help get our economy back on track,” Izza said.

ICAEW urges the new government to use the remainder of this Parliament to restore growth in the economy and level up the UK. In particular, it believes financial support to households and small businesses is necessary to counter the economic impact of rising energy prices. However, ICAEW would favour the expansion of existing direct fiscal support schemes rather than broader tax cuts.

ICAEW is also urging the government to set out a long-term plan for tax and public spending to give businesses certainty they urgently need around the tax and spending plans of the new government, including pledges from the Prime Minister on employer National Insurance and Corporation Tax. 

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