Kwasi Kwarteng: we must ‘stay the course’ with UK tax-cutting plan

Chancellor will use Tory conference speech to reassert that his tax cuts are the correct approach

Britain's Chancellor of the Exchequer, Kwasi Kwarteng, at the opening day of the Conservative Party Conference in Birmingham, England, on Sunday. AFP
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As Kwasi Kwarteng faces the Conservative Party during a crunch speech at the conference on Monday, the Chancellor will seek to calm the markets, defend his plan to boost UK economic growth and secure his position.

Mr Kwarteng's mini-budget bought turmoil in the City of London, was criticised by the International Monetary Fund and resulted in a £65 billion ($73bn) emergency intervention by the Bank of England to restore order.

“We must stay the course” with the these plans to avoid a future of “slow, managed decline”, the Chancellor will tell activists on Monday.

The plan to axe the 45 per cent income tax rate for top earners and scrap the curbs on bankers’ bonuses at a time when many households face a crisis in the cost of living has been condemned by political opponents and Tory critics, with Mr Kwarteng bearing the brunt of the criticism.

Prime Minister Liz Truss was accused of throwing him under a bus by singling him out as responsible for the tax cut, saying “it was a decision the Chancellor made”, rather than one debated by the entire Cabinet.

In his speech in Birmingham, early excerpts of which have been released, Mr Kwarteng will insist the gamble made by the Tories to cut taxes and axe red tape in the hope of increasing economic growth to an annual trend of 2.5 per cent was the correct approach.

And he will highlight the strength of the dollar as a problem facing all economies, rather than one confined to the UK, which saw the pound fall to a record low against the US dollar after the mini-budget before regaining ground.

Mr Kwarteng will say that “major currencies” are “wrestling an incredibly strong US dollar”.

UK Prime Minister Liz Truss defends economic plan - video

The speech will be keenly watched in the City, although it is expected to be delivered about 4pm, shortly before the markets close.

“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," Mr Kwarteng will say.

“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 try to convince lenders that he has a plan to manage the government’s debt with an “iron-clad commitment to fiscal discipline”.

The government will be “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.

“You cannot have a strong NHS without a strong economy," Mr Kwarteng will say.

"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 per cent 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 Big Bang 2.0” package of financial regulation, in coming weeks before a “medium-term fiscal plan” on November 23.

That will be accompanied by the Office for Budget Responsibility’s forecasts.

Updated: October 03, 2022, 5:46 AM