UK minister shies away from committing to retaining tax policy

A retail store with closing down sign is seen in London, Britain, Sept 30, 2022. (MAJA SMIEJKOWSKA / REUTERS)

LONDON – Foreign minister James Cleverly shied away from confirming or denying whether the government would retain its policy on low corporation tax on Thursday, saying only it was important to keep businesses competitive.

The chancellor will come to the despatch box. I think it's absolutely right that we've made it clear that we want to invest in businesses

James Cleverly, 

UK Foreign minister 

Prime Minister Liz Truss is under pressure to change tack on an economic package that has roiled markets, with some investors and her own lawmakers calling on her to reverse a plan for 43 billion pounds ($48 billion) of unfunded tax cuts, including scrapping an increase in corporation tax from 19 percent to 25 percent.

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Asked in a series of interviews if the government would scrap that move, Cleverly said it was important to invest in businesses and help them stay competitive, and that he backed the overall project to kick-start economic growth.

"The chancellor will come to the despatch box," he said when asked by Sky News whether the corporation tax plan would definitely stay. "I think it's absolutely right that we've made it clear that we want to invest in businesses."

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Truss, the 47-year-old former foreign secretary, was elected last month by members of her party and not the broader electorate on a promise to snap the economy out of years of stagnation by cutting taxes and reforming areas such as planning, migration and employment.

But the Sept 23 launch of its new economic policy triggered a fire-sale in the government bond market that has driven up borrowing costs and mortgage rates and forced the Bank of England to intervene to protect pension funds.

Mel Stride, chair of parliament's Treasury Select Committee and a backer of Truss's leadership rival Rishi Sunak, said on Wednesday more policy reversals might be needed after the government reversed its decision to scrap the top rate of income tax.

Former finance minister Sajid Javid, who backed Truss in the leadership contest, was quoted in the Times newspaper as saying the government needed to scale back either tax cuts or energy subsidies because it was "absolutely crucial" to show it could balance the books.

Finance minister Kwasi Kwarteng will present a full fiscal policy along with borrowing and growth forecasts on Oct 31.