Written by Shaun Moore, tax and financial planning expert at Quilter
As a long-time friend and ally of Prime Minister Liz Truss, it comes as little surprise that Kwasi Kwarteng has been promoted to Chancellor. However, Kwarteng faces a long and difficult path ahead in his new role, and the duo will no doubt come under major scrutiny in the coming weeks as plans to help ease the cost-of-living crisis are laid out.
The severity of Kwarteng’s oncoming challenge largely echoes that of former Chancellor Rishi Sunak’s battle with the Covid pandemic. In its aftermath, coupled with the many other global issues from supply chain bottlenecks to the devastating ongoing war in Ukraine, the country now faces a rapidly slowing economy and rising interest rates. As such, questions will immediately be asked as to how and when help will come and, ultimately, how it will be paid for.
Tax will be a hot topic in the coming weeks as Truss made a number of substantial promises during her leadership campaign. Truss claimed she would lower taxes as opposed to providing handouts to support businesses and households with ever rising energy costs, as well as cancel the national insurance rise, scrap a planned increase in corporation tax and even potentially look to increase the marriage allowance which would allow couples to pool their personal tax allowance.
Should he fulfil these promises, Kwarteng’s approach looks set to be expensive and substantially different to that of Rishi Sunak. While Sunak was keen to slow inflation, balance the books and limit borrowing by increasing taxes, Kwarteng has already faced some criticism for suggesting further borrowing could well be on the cards. What’s more, while Kwarteng and Truss claim tax cuts will stimulate growth, they are likely to face criticism if they are not seen to be doing enough to help the poorest in the country.
As former Secretary of State for Business, Energy and Industrial Strategy, Kwarteng has a breadth of experience in working closely with both business and energy suppliers – both of which could prove to be valuable relationships in the coming months.
While the leadership campaign claims worked well enough to secure Truss the role of Prime Minister, Chancellor Kwasi Kwarteng now faces a tricky balancing act in terms of bringing those claims to fruition while providing appropriate support to the British public to help them through the ever-worsening cost-of-living crisis. Should an emergency budget be called, all eyes will be on the new Chancellor to see just how he fares under the pressure.