How Liz Truss dug in over pledge to axe corporation tax rise

Posted on October 13, 2022Comments Off on How Liz Truss dug in over pledge to axe corporation tax rise

Liz Truss put adherence to principle at the heart of her bid for the leadership of the Conservative party, often using her support for cutting corporation tax to illustrate a wider preference for letting people and businesses keep more of their own money.

However, now the policy has been mooted as one of those that could be chopped to help fill a £65bn black hole of unfunded revenue loss in the mini-budget.

These are the pledges Truss and some of her most senior supporters made during the course of her campaign and premiership so far:

20 July

As she squeaked on to the ballot paper in the final round of voting by MPs, Truss told the Spectator she did not want to increase corporation tax because “we need to attract the investment to drive business and growth”.

21 July

Patrick Minford, who Truss cited in a radio interview as an economist that believed tax cuts would not fuel inflation, told BBC Newsnight the planned rise in corporation tax to 25% was “very damaging” and would “stop growth in its tracks”.

The following day, he told GB News that putting up the tax “would damage growth and innovation by all these entrepreneurial companies”.

31 July

In a press release, Truss’s campaign savaged her rival Rishi Sunak for standing by the planned rise to corporation tax he announced as chancellor, calling him the “first chancellor since Labour chancellor Denis Healey [in 1974] to raise corporation tax”.

2 August

Jacob Rees-Mogg, who was promoted to business secretary after the campaign, told LBC: “I think increasing corporation tax at this point when you need the economy to be growing is a really rotten policy.”

12 August

Another cabinet supporter – later to become deputy prime minister – also stood against the rise. Thérèse Coffey told GB News that “we need to be putting more money into people’s pockets” and so “by not putting up corporation tax, we unlock that opportunity”.

22 August

As the leadership campaign entered its final few weeks, the Truss campaign issued a new release saying she “can be trusted to … stop the planned hike in corporation tax”.

23 August

The pledge remained a cornerstone of her leadership bid, with the then foreign secretary stressing: “Taxes are currently at a 70-year high. And there is a current proposal to raise corporation tax, which I believe would deter investment and make it harder for us to grow the economy.”

20 September

Once prime minister and after the Queen’s mourning period, Truss used an interview with the BBC’s political editor, Chris Mason, to declare: “Corporation tax needs to be competitive with other countries so that we can attract that investment.”

23 September

In the now infamous mini-budget, the chancellor, Kwasi Kwarteng, confirmed the move that had been touted for so long. He said: “Every additional tax on business is ultimately passed through to families through higher prices, lower pay, or lower returns on savings. So I can therefore confirm that next year’s planned increase in corporation tax will be cancelled. The UK’s corporate tax rate will not rise to 25% – it will remain at 19%. We will have the lowest rate of corporation tax in the G20.”

In the aftermath of the mini-budget, the Treasury even included a quote from the founder of Small Business Britain hailing the scrapping of the planned corporation tax rise, saying it and other measures would “support and encourage entrepreneurial growth”.

29 September

As the mini-budget began to unravel, Truss stuck to her guns. She told the BBC’s West Midlands political editor she wanted to help families, adding: “That’s why we’re keeping corporation tax low to keep the investment coming into our country.”

5 October

Finally, in her speech at the Conservative party conference, Truss was emphatic: “We are keeping corporation tax at 19%, the lowest in the G20.”

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