The Chancellor will insist that his plan to boost growth is right despite mounting opposition from senior Tories.
02 October 2022
Kwasi Kwarteng will insist the Conservative Party must “stay the course” and back his plan for tax cuts in the face of a mounting Tory revolt.
The Chancellor’s mini-budget triggered turmoil in the City, was criticised by the International Monetary Fund and resulted in a £65 billion emergency intervention by the Bank of England to restore order.
Former cabinet ministers Michael Gove and Grant Shapps took aim at the plan to cut income tax for people earning more than £150,000 at a time when millions of people are seeing their family finances squeezed.
But Mr Kwarteng will insist his measures are vital to boost growth and avoid a “slow, managed decline”.
The plan to axe the 45% income tax rate for top earners and scrap curbs on bankers’ bonuses at a time when many households face a cost-of-living crisis has been condemned by political opponents and Tory critics, with Mr Kwarteng bearing the brunt of the criticism.
Prime Minister Liz Truss was criticised for singling Mr Kwarteng out as responsible for the tax cut, saying “it was a decision the Chancellor made” rather than one debated by the entire Cabinet.
Mr Gove toured fringe events at the Conservative Party conference in Birmingham to give his verdict on the plan, which he called “not Conservative”, hinting that he could vote against the measure in the Commons.
Former transport secretary Mr Shapps used a Times column to say “this is not the time to be making big giveaways to those who need them least” because “when pain is around, pain must be shared”.
“This bolt-from-the-blue abolition of the higher rate, compounded by the lack in communication that the PM acknowledges, is an unforced error that is harming the Government’s economic credibility,” he said.
Damian Green, a former deputy prime minister, warned the Tories would lose the next election if “we end up painting ourselves as the party of the rich”.
Tory ex-chancellor George Osborne said it was “touch and go whether the Chancellor can survive” the fallout, telling the Andrew Neil Show it would be “curtains” for Mr Kwarteng if his speech on Monday went badly.
Andrew Bowie, who was parliamentary private secretary to Theresa May when she was in No 10, agreed with Mr Gove that unfunded tax cuts were not Conservative.
Former minister Maria Caulfield said: “I can’t support the 45p tax removal when nurses are struggling to pay their bills.”
The Telegraph reported that a vote on the 45% measure would not be held until after the November 23 financial statement which will set out how the party aims to bring the public finances under control.
In his Conservative Party conference speech, Mr Kwarteng will insist he will manage taxpayers’ money with an “iron-clad commitment to fiscal discipline”.
But he will insist the gamble by the Tories to cut taxes and axe red tape in the hope of increasing economic growth to an annual trend of 2.5% was the correct approach.
He will highlight the strength of the dollar as a problem facing all economies, rather than just the UK, which saw the pound fall to a record low against the US currency after the mini-budget before regaining ground.
He will say that “major currencies” are “wrestling an incredibly strong US dollar”.
The speech will be keenly watched in the City of London, although it is expected to be delivered around 4pm, shortly before the markets close.
Mr Kwarteng will say: “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 isn’t, and shouldn’t be.
“We needed a new approach, focused on raising economic growth.
“That is the only real way to deliver higher wages, more jobs, and crucially, revenue to fund our precious public services, and it is the only way to achieve long-term fiscal sustainability.
“We must stay the course. I am confident our plan is the right one.”
Mr Kwarteng will say his plan is “sound, credible and will increase growth”, making that “my promise to the people of this country”.
Setting out his “new economic deal”, he will say the Government is “wholly committed to economic growth”, delivering “more businesses, more jobs, higher pay” and ultimately “more money for public services”.
But his speech comes with Ms Truss failing to rule out cuts in public spending to help balance the books, and the possibility of benefits facing a real-terms cut as earners on more than £150,000 see their taxes slashed.
Mr Kwarteng will say: “You cannot have a strong NHS without a strong economy. You cannot have good schools without a strong economy. You cannot have quality infrastructure without a strong economy.
“With this plan, we are aiming for 2.5% annual trend growth. We did it before. We can do it again.”
The Chancellor is expected to set out further details of his reforms, including the so-called “Big Bang 2.0” package of financial regulation, in the coming weeks ahead of a “medium-term fiscal plan” on November 23, which will be accompanied by the Office for Budget Responsibility’s forecasts.