Kwarteng says ‘we must stay the course’ as he defends tax cuts
Kwasi Kwarteng will tomorrow defend his tax cuts and declare “we must stay the course”, after the first day of Tory party conference was overshadowed by blue-on-blue attacks.
The chancellor is expected to say he is committed to “fiscal responsibility”, after funding his tax cuts through more borrowing, in a bid to calm financial markets.
Kwarteng and Liz Truss have been firm in defending their mini-Budget – which included a cut to National Insurance, alongside cuts to the basic and top rates of Income Tax – despite calls from her own MPs to cancel some of the measures.
Tory big beast Michael Gove today told the BBC the mini-Budget, and particularly the scrapping of the bankers’ bonus cap, were a “display of the wrong values” in a series of attacks on Truss.
Former culture secretary Nadine Dorries also accused Truss of “throwing [Kwarteng] under a bus” for saying he never told the cabinet about the cut to the 45p rate of Income Tax.
The Prime Minister today said she should have “laid the ground better” before the announcement, but added that “I stand by the fact we announced it quickly, because we had to act”.
Kwarteng is today expected to say: “We must face up to the facts that for too long our economy has not grown enough. The path ahead of us was one of slow, managed decline.
“I refuse to accept that it is somehow Britain’s destiny to fall into middle income status or that the tax burden reaching a 70-year-high is somehow inevitable.”
It was reported by ITV today that the chancellor has appointed Antonia Romeo, top civil servant in the Ministry of Justice, as Treasury permanent secretary.
The debt-funded tax cuts led to a large sell-off of UK Treasury bonds – sending yields on long-term government borrowing soaring – last week, along with a slump in the value of the pound against the US dollar and losses on the FTSE100.
The pound has since recovered in reaction to the Bank of England’s decision to spend £65bn in stabilising the UK’s bond market.
Kwarteng is expected to outline spending cuts next month in his “medium-term fiscal plan” in response to market concerns about the growing size of the UK’s debt pile.
It has been speculated that Kwarteng will U-turn on the government’s promise to keep benefits linked to inflation.
Gove called on the government to cancel the cut to the top rate of Income Tax and indicated he may not vote for the government’s mini-Budget in parliament.
“There are two things that are problematic, two major things that were problematic,” he said.
“The first is the sheer risk of using borrowed money to fund tax cuts. That is not conservative.
“The second thing is to cut the 45 pence tax rate and at the same time to change the law which governs how bankers are paid in Canada.”
The Conservative party conference in Birmingham is full of potential danger for the Prime Minister, with some of her own backbenchers already rebelling against her policies.
A shock YouGov poll last week also gave Labour a 33-point lead over the Tories – the biggest margin of any polls since the late 90s.