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Liz Truss promises tax cuts and action on energy bills in first speech as PM

·4-min read
New UK prime minister Liz Truss gives her first speech at Downing Street. Photo: Leon Neal/Getty Images
New UK prime minister Liz Truss gives her first speech at Downing Street. Photo: Leon Neal/Getty Images

Liz Truss has promised to take action on energy bills and cut taxes in her first address to the nation as prime minister.

Speaking outside No10 Downing Street on Tuesday she unveiled three key areas to tackle the cost of living crisis as energy bills spiral out of control and a recession looms.

She pledged "a bold plan" to grow the economy through tax cuts and reform.

"I will cut taxes to reward hard work and boost business led growth and investments," she said. "I will drive reform in my mission to get the United Kingdom working building and growing."

Truss also promised to take "hands on action" on the energy crisis "caused by Putin's war".

"I will take action this week to deal with energy bills and to secure our future energy supply," she said.

Finally, she vowed to put the UK on the "path to long-term success", adding that she will make sure that people can get doctor's appointments and the NHS services they need.

"We will put our health service on a firm footing by delivering on the economy, on energy and on the NHS," she said.

Read more: Liz Truss's energy bills freeze: What does it mean for me?

Energy bills

Although Truss did not confirm or announce a freeze on the energy price cap she, according to reports, will hold household bills at around £2,500 a year in one of her first acts as prime minister.

The new Tory party leader will reportedly cap Britons’ soaring gas and electricity bills as soon as Thursday, as part of a package that could cost up to £90bn.

The policy is expected to be funded through general taxation or a future levy on consumer bills.

Money saving expert Martin Lewis said in a blog post he would "absolutely welcome" bills being kept close to current levels.

“The big benefit, and problem, of this is (almost) everyone gets it," Lewis said on the idea of a non-targeted scheme.

The consumer champion also cautioned energy firms could "add a chunk to bills" once the worst of the crisis is over. "What if bills don’t drop — what happens then?"

Economy

Economists have said that Truss's potential plan to freeze energy bills will help bring down inflation, with any changes taking the pressure off the BoE to raise rate aggressively at its next meeting later this month.

Samuel Tombs at Pantheon Macroeconomics said inflation could claw back from the 40-year high of 10.1% recorded in July to the BoE's 2% target in the second half of 2023 thanks to the freeze on bills and a fall in wholesale prices.

Neil Shearing, group chief economist at Capital Economics, called the mooted XXX measure as an "effective but expensive sticking plaster".

Read more: What a Liz Truss government means for your tax, bills and savings

Shearing said it would lead to prices peaking at 11% in October, as opposed to the 14.5% forecast for January.

He noted that the move could also help reduce the severity of the looming recession.

"The economy is still likely to enter recession, but the peak-to-trough fall in real GDP may be more like 0.5% than our current forecast of 1%," he said.

Business

UK businesses have urged the prime minister to deliver support for companies immediately in order to support the economy amid forecasts of a recession by year end.

Truss on Tuesday announced tax cuts to help boost business led growth and investments, but the exact details are expected to be announced later this week.

Danni Hewson, financial analyst at AJ Bell, said: "Rain may have dampened the pomp and ceremony that surrounded the official appointment of the UK’s new prime minister, but its inflation’s sweltering heat that Liz Truss really needs to focus on.

Read more: Liz Truss urged to take immediate action on struggling UK economy

"Dribs and drabs of her energy support package may have already leaked out with tomorrow looking likely to be the day the numbers will begin to be crunched.

"Who will pay, who will benefit and how will the extra spending capacity retailers and hospitality businesses are banking on coming the way of their consumers play into the current storm of high prices?

"Truss and whoever she appoints as chancellor will need to have deft hands, balancing the overwhelming need for help with the overwhelming need to cool the economy."

Watch: Liz Truss' speech after being made new party leader and next PM