Written by 4:30 am Europe Economy

FirstFT: Truss’s radical economic shift

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Good morning. Liz Truss has declared that cutting taxes for the wealthy and profitable companies is not “unfair”, signalling a radical shift in economic policy ahead of a growth-focused mini-Budget on Friday.

The UK prime minister has signed off plans to cut national insurance, a policy that will disproportionately help the better-off, reverse a planned rise in corporation tax and lift a cap on bankers’ bonuses.

While recent Conservative chancellors have focused on the “distributional effects” of tax changes among different income groups, Truss argued that cutting the tax burden on the rich and business will boost growth.

“I don’t accept this argument that cutting taxes is somehow unfair,” she told Sky News in New York.

“What we know is people on higher incomes generally pay more tax so when you reduce taxes there is often a disproportionate benefit because those people are paying more taxes in the first place.”

Thanks for reading FirstFT Europe/Africa. Share feedback on today’s newsletter at firstft@ft.com. — Jennifer

1. Nato accuses Russia of escalating conflict The military alliance has accused Moscow of escalating its war on Ukraine after Kremlin allies in four occupied territories announced referendums to join Russia this week and the country’s parliament passed a law that could enable military mobilisation.

2. Italy could turn on Brussels, tycoon warns Italy is at risk of shifting its alliances to eastern European countries with rightwing governments if the hard-right emerges as the winning coalition in this week’s general election as expected, according to Carlo De Benedetti, publisher of pro-EU newspaper Domani, who has long been associated with the centre-left.

  • Opinion: Europe is bracing for the return of a more fissiparous Italy, writes Rosa Balfour, director of Carnegie Europe.

3. Al Gore: Europe must resist efforts to cash in on energy crisis The former US vice-president has urged European governments to push back against fossil fuel companies’ efforts to capitalise on the energy crisis by locking consumers into long-term dependence on hydrocarbons.

“Nations planning their strategies have to be on guard in all those negotiations, whether with private companies or sovereigns” — Al Gore

4. Danish pension fund: PE may become a ‘pyramid scheme’ Mikkel Svenstrup, chief investment officer at ATP, compared the private equity industry to a pyramid scheme, warning that buyout groups are selling companies to themselves and peers on a scale that “is not good business”.

5. Ranks of super-rich swell by a fifth The number of people worth more than $100mn increased 21 per cent in 2021 to 84,500, according to the latest Credit Suisse Global wealth report. The US gained 30,000 ultra-high-net-worth individuals, followed by China with 5,200; the UK posted the largest fall, with 1,130.

The day ahead

UK business support Business secretary Jacob Rees-Mogg is expected to unveil details of the business support scheme, which will cap the wholesale costs that energy suppliers can incorporate into companies’ bills but not determine the final rate paid by corporate customers.

UK defence policy review In a speech at the UN General Assembly, Liz Truss will commit to spending 3 per cent of gross domestic product on defence by 2030 as she launches a UK defence review, just 18 months after the last such analysis. The prime minister will also meet US president Joe Biden, with Northern Ireland trading arrangements expected to come up.

Fed interest rate decision The Federal Open Market Committee is expected to raise its benchmark interest rate at least 0.75 percentage points for the third time in a row at the end of today’s meeting, as officials try to hit the brakes on an overheating economy.

  • The FT View: Increasing the cost of credit further will hurt already ailing households and businesses, but central banks need to hold firm to tackle inflation.

Economic indicators South Africa’s consumer price index for August is out. Inflation rose to 7.8 per cent the month before. The UK publishes public sector borrowing data for the same month. Argentina has trade and unemployment data. Brazil’s central bank is expected to raise rates.

Corporate earnings General Mills reports first-quarter results before markets open. The US consumer foods group has battled supply chain headwinds and higher costs, which have been passed on to consumers.

What else we’re reading

Britain’s economic consequences Liz Truss’s government will set a target of annual growth at 2.5 per cent. Should we take that seriously? No and yes, writes Martin Wolf. No, because the idea that the government of a market economy can meet a growth target is ridiculous. Yes, because it will guide policy. The question is whether it will guide it for good or bad. His bet is on the latter.

An illustration of UK prime minister Liz Truss and chancellor Kwasi Kwarteng
Martin Wolf: ‘It is surely a fantasy that further tax cuts and deregulation will transform performance’ © James Ferguson

Better work-life balance or another ‘mommy track’? It sounds like great work if you can get it. Citigroup has opened a hub for junior investment bankers in the sunny Spanish city of Málaga. But Brooke Masters is dubious of the bank’s solution to burnout as big financial institutions return to pre-pandemic working patterns, including long hours.

Negotiating your way out of a ransomware attack Almost 60 per cent of organisations targeted by ransomware cyber attacks in the past year paid out to restore their data. Find out if you can protect your company from hackers and avoid a crippling payout in our interactive game.

Where are the women in asset management? While UK asset managers have appointed more women to boards or executive teams, the picture for those managing money is still incredibly male. Helen Thomas examines why this sector, which espouses the value of diversity for better decision-making, has failed to make great strides.

‘Magic numbers’ are clouding the climate debate Climate change has become an existential crisis of notable exactitude, its parameters mapped out by precise temperature rises, thresholds, deadlines and “tipping points” of no return. But some scientists say climate messaging needs a reset to make it more accurate and relevant to our lives.

Style

Baseball caps are back, but what about in the office? Even in our casualised, post-lockdown world, workplace hats may be a step too far, writes Teo van den Broeke.

Disrupted Times — Documenting the changes in business and the economy between Covid and conflict. Sign up here

Asset ManagementSign up here for the inside story of the movers and shakers behind a multitrillion-dollar industry

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