Liz Truss' plan to cut taxes could lead to a boom for the UK economy, according to one of Britain's biggest property companies.
Sir Nigel Wilson, head of one of the UK's largest pension funds, said that lowering business tax rates would increase the appeal of Britain as an investment location.
“Reducing the tax burden on foreign companies will help them see that the country is open to business,” he added.
The reason for this is because when there is an increase in investment, companies tend to hire more employees which results in higher taxes. This means that the government receives more money from these employees which makes them feel better about investing more.
This is called the trickle-down effect.
It's also important to note that the opposite happens when there is a decrease in investment. When there is a decrease in employment, the government feels worse about spending money and thus reduces its budget.
This is known as the trickle-up effect.
Attracting foreign investment could help cushion the blow if the UK is hit by another economic crisis.
Ms Truss and Mr Sunak continued to trade blows yesterday about whether immediate tax breaks would boost economic growth or cause prices to rise.
Ms Truss is against tax cuts because she believes they will not stimulate economic activity, but Mr Sunak thinks tax cuts would be too risky for the economy at present.
Sir Nigel, one the highest-ranking Brexit backers in the Square Mile, called for whoever becomes leader of the Conservative Party to speed up the implementation of Brexit regulations.
He pointed out that there were delays in implementing the controversial Solvency 2 rule book which requires insurance companies to keep large amounts of cash on hand and prevent them from making investments in illiquid assets, like infrastructure.
“The Brexit referendum took place in June 2016 and we are still discussing Solvency II reform,” he added.
"The result has been an illusionary Brexit dividend." Those who voted for this supposedly illusive Brexit dividend have yet to witness any real benefits from it.
There is an urgent demand for an investment-led economic recovery.
Frustrated ministers accuse the Bank of England's PRU of blocking reform.
Sources told us last month that Threadneedle Street was 100 per cent opposed to any cuts to red tape after a row broke out over the insurance market.
Sir Nigel's remarks came after Legal & General posted first half earnings of £1.2 billion, up from £1 billion during the same period last time.
Higher interest rates mean that companies need to put less money into their pension plans right now so they can pay out more later.
Commenting on the high cost of living, Sir Nigel said: "We're committed to ensuring that we provide financial security for our customers."
Legal & General was further bolstered by strong demand for corporate pensions, known as bulk annuity deals, which have rebounded from a dip during the pandemic.
At its fund-managing unit, which is one of its largest shareholders, the group managed £1.3tn worth of investments at the end of June, down from £1.5tn at the end of 2015. But that compares well with rival asset manager ABRdN, which saw its assets under management fall by 6 per cent to £1.4tn.
Legal & General's claims for pandemic-related expenses were consistent with the £57 million the company had previously earmarked to cover these costs.
Analysts at Bank Of America said: "LG is firing on all cylinders; each division is performing well."
They added that the business has been doing well and is prepared for any macroeconomic changes this winter might bring.