Chancellor jets to US for crunch talks over energy prices
CHANCELLOR Nadhim Zahawi will hold talks with his US counterparts this week about efforts to curb global energy prices.
The Treasury said that Mr Zahawi would use what could be his final days in office to hold discussions in Washington and New York about stabilising inflation and helping countries maintain sanctions against Vladimir Putin.
Mr Zahawi will meet up with banking chiefs at the New York Stock Exchange today before heading to Washington to discuss support for Ukraine, the global economic outlook and energy security with senior figures at the US central bank,
‘Increase gas exports to Europe’
the US Treasury and international financial institutions. The Treasury declined to comment in detail but Mr Zahawi is likely to urge US leaders to increase exports of liquid natural gas to Europe to help stabilise gas prices after Putin cut supplies.
Labour dismissed the trip, saying ministers would be better off ‘listening to people here at home’.
The move came as the debate intensified over the tax plans of leadership frontrunner Liz Truss. The Foreign Secretary’s allies hit back at overnight criticism from the Institute for Fiscal Studies of her plans for tax cuts, saying she was committed to challenging the ‘ economic orthodoxy’ that had resulted in low economic growth.
Miss Truss is already committed to halting increases in national insurance and corporation tax put in place by her leadership rival Rishi Sunak.
But her allies have said that she is also ‘ certain’ to end Mr Sunak’s four- year freeze on income tax thresholds.
She is also considering wider tax cuts to boost incomes, including cuts to the basic rate of income tax and a temporary reduction in VAT. One report even suggested she could slash the headline rate of VAT in half, from 20 per cent to 10 per cent, at a cost of £60billion.
A study by economists urges Miss Truss to embrace a £100billion package of tax cuts.
The Centre for Brexit Studies report backs an immediate VAT cut, and calls for other measures including scrapping the 45 per cent top rate of tax and cutting the 40 per cent rate to 30 per cent.
It also says corporation tax should be slashed by 10 per cent to encourage investment. And it even calls for an ‘immediate rise’ in universal credit to offset the impact of inflation this year – an idea being considered by Miss Truss for possible inclusion in an emergency budget planned for next month.
Joint author Patrick Minford, an economist who has been cited by Miss Truss, said: ‘The Treasury orthodoxy embraced by the Government up to now has sacrificed a tax system supporting growth to a policy of stopping new public borrowing.’ He said ‘short-term debt rules’ imposed by the Treasury had got in the way of growth.
The report suggests the reform could boost growth by 2 per cent, leading to lower debt in the long term. It also criticises the Office for Budget Responsibility for providing overly negative forecasts about the state of the economy.
The report accuses the economic watchdog of having ‘form in gloom’ and suggests that it should be broken up after producing forecasts that encouraged the Government to raise taxes ‘prematurely’. However, Paul Johnson, director of the Institute for Fiscal Studies, said the idea of a major cut to VAT was ‘inappropriate’ and risked exacerbating inflation – and warned against slashing income tax on top of other tax cuts.