Will you be better or worse off under Liz Truss?

·Political Correspondent, Yahoo News UK
·6-min read

Watch: Liz Truss to become PM after winning leadership vote

Liz Truss has been named the next prime minister.

Her pledges to cut taxes were the cornerstone of her leadership campaign, with national insurance, corporation tax and the green levy on energy bills in her sights.

She says this is part of a plan to promote economic growth in the UK, as well as help people struggling with the cost-of-living crisis.

Read more: The key dates coming up in the cost of living crisis

BIRMINGHAM, ENGLAND - AUGUST 23: Foreign Secretary and Conservative leadership hopeful Liz Truss speaks during the Conservative leadership hustings at the NEC on August 23, 2022 in Birmingham, England. Foreign Secretary, Liz Truss and former Chancellor Rishi Sunak are vying to become the new leader of the Conservative Party and the UK's next Prime Minister. (Photo by Anthony Devlin/Getty Images)
Liz Truss is promising multiple tax cuts if she wins on Monday. (Getty Images)

Truss is yet to reveal how she is going to pay for the measures in the short term, leading to experts warning it will mean more borrowing to make the tax reforms promised.

Experts have also warned that the tax cuts will not be enough to tackle the scale of the cost-of-living challenge, and will benefit the wealthiest while leaving the poorest with little to no extra help.

Yahoo News UK looks at what her promises to date could mean for you:

National Insurance

Rishi Sunak and Liz Truss taking part in the BBC Tory leadership debate, Our Next Prime Minister, presented by Sophie Raworth, a head-to-head debate at Victoria Hall in Hanley, Stoke-on-Trent, between the Conservative party leadership candidates. Picture date: Monday July 25, 2022.
Rishi Sunak and Liz Truss clashed over her planned tax cuts, with Sunak warning they are poorly targeted and will fuel inflation. (PA)

What she's promised:

Truss has pledged to reverse this year's increase in national insurance contributions (NICs) at a cost of £13bn per year.

In April, NICs increased by 1.25 percentage points, with then chancellor Rishi Sunak arguing it was necessary to inject funding into social care.

Read more: Inflation and rising energy bills hit UK service sector

The policy was controversial, and Truss has since claimed she privately opposed the increase.

She argues that the reversal would help those struggling with the cost-of-living crisis.

What the experts say:

Analysts warn the policy is not a solution to the cost-of-living crisis as it helps high earners far more than poorer households.

In a report on Thursday, the Resolution Foundation said the tax cut would be "irrelevant" for households on low incomes.

"Only 15% of the cost of scrapping the national insurance rise would go to the poorer half of the population, while 28% would go to the top 20th," said the report.

According to the Tony Blair Institute for Global Change (TBI), the tax cut would save households on the lowest incomes just 76p a month on average.

Marriage tax allowance

Contender to become the country's next Prime minister and leader of the Conservative party British Foreign Secretary Liz Truss attends a Conservative Party leadership campaign event at Condimentum Ltd at the Food Enterprise Park in Norwich, eastern England on August 25, 2022. (Photo by JOHN SIBLEY / POOL / AFP) (Photo by JOHN SIBLEY/POOL/AFP via Getty Images)
Liz Truss has said reforming the marriage tax allowance will make it easier for stay-at-home parents. (Getty Images)

What she's promised:

The marriage allowance allows married couples to transfer £1,260 of their personal allowance to their husband, wife, or civil partner each year.

The arrangement could reduce their tax by up to £252 in the tax year.

Read more: Britons will pay £273 on energy bills before they even use any fuel, says Martin Lewis

However, Truss has said she would order the Treasury to consider allowing their full £12,570 personal tax allowance to a partner.

The change could be worth around £2,500 per couple, costing around £6.7bn.

What the experts say:

The plans, which were mooted early on in the leadership campaign, have received little attention.

When they were announced, Labour MP Stella Creasy warned the idea could prevent mothers from returning to work after giving birth.

She told Stylist magazine: “Families across this country are crying out for affordable childcare so that they don’t have to choose between their career and their kids.

“Instead of helping them and investing in provision, Liz Truss seems to think taxes should be used to make women stay home instead. It shows you this Tory party wants to take Britain back to the 1950s, not help everyone thrive in the 2020s."

Truss's team confirmed last week that they still plan to review the marriage tax allowance.

Corporation tax

What she's promised:

In March 2021, then-chancellor Sunak pledged to increase the main rate of corporation tax, from 19% to 25% from April 2023, for big companies making annual profits in excess of £250,000.

Truss has said the planned corporation tax rise will stifle growth and she will therefore reverse it.

Read more: This is how much it will cost to use your household appliances under the new energy price cap

According to government estimates, this would cost £17bn a year.

What the experts say:

The Institute for Fiscal Studies (IFS) has said while it is likely the cancellation of the hike will stimulate some economic growth due to incentivising investment, it will not cover the entire cost.

"We would... expect the long-run cost to be considerably lower than £17bn a year – though the effect would certainly not be big enough for the tax cut to pay for itself," it said.

The Resolution Foundation has said the tax cut is "not a serious answer for the current crisis”.

BIRMINGHAM, ENGLAND - AUGUST 23: Foreign Secretary and Conservative leadership hopeful Liz Truss arrives to speak on stage on August 23, 2022 in Birmingham, England. Foreign Secretary, Liz Truss and former Chancellor Rishi Sunak are vying to become the new leader of the Conservative Party and the UK's next Prime Minister. (Photo by Anthony Devlin/Getty Images)
Liz Truss' tax cuts combined could amount to more than £100bn. (Getty Images)

Green levy

What she's promised:

According to Ofgem, green levies make up 8% of energy bills – or around £157 a year.

The levies go towards renewable energy investment and grants for insulation.

Read more: Energy bills set to rise 35 times faster than wages by the end of the year

Truss has said she will suspend the levies in order to help households with soaring energy bills.

What the experts say:

"Liz Truss’ policy makes no sense," Simon Francis, co-ordinator of the End Fuel Poverty Coalition, told Yahoo News UK.

“The green levies are a tiny proportion of peoples’ energy bills and actually help fund programmes that lift the most vulnerable out of fuel poverty."

The Resolution Foundation has warned suspending the green levy will result in more borrowing.

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UK inflation is at its highest level for decades. (ONS CPI)

Is she planning anything else?

Reports in The Daily Telegraph and The Times on Monday suggest she is likely to introduce an energy bills freeze in some form.

The Times reports the package could be on the scale of the furlough scheme introduced by then-chancellor Rishi Sunak when the COVID pandemic struck, while The Telegraph suggests the specifics of such a policy are still being debated.

Truss is also reportedly said to be considering slashing VAT by 5% in a bid to help tackle the cost of living.

It is estimated the move would cost the Treasury around £60bn, and will be the most expensive of her tax cuts.

Read more: Energy bills set to rise 35 times faster than wages by the end of the year

She has also said she will not introduce any new taxes under her government, despite her tax pledges so far amounting to tens of billions of pounds.

Watch: Truss attacks ‘Treasury orthodoxy’ as she promotes tax-cutting leadership pitch