Chancellor defends tax-cutting strategy after sending the pound plummeting
Chancellor Kwasi Kwarteng has said he is “confident” his tax-cutting strategy to drive economic growth will work despite the turmoil on the financial markets.
In talks with City investors in the wake of Friday’s mini-budget, Mr Kwarteng insisted he was committed to “fiscal discipline” and that he had a “credible plan” to start to bring down the UK debt.
He also emphasised the importance of the “supply side” reforms ministers will be setting out in the coming weeks, including his “Big Bang 2.0” reforms of the financial market regulations, in supporting growth.
“We are confident in our long-term strategy to drive economic growth through tax cuts and supply side reform. Supply side reforms are critical – increasing capacity brings down prices,” he said, according to a Treasury readout of the meeting.
“Cabinet ministers will set out more supply side measures over the coming weeks to make meaningful change. Right across government, departments have to be focused on this.
“As I said on Friday, every department will be a growth department.
“We are committed to fiscal discipline, and won’t re-open the spending review. We have a medium-term fiscal plan coming on November 23, alongside an OBR (Office for Budget Responsibility) forecast. That will be a credible plan to get debt to GDP falling.
“We have responded in the immediate term with an expansionary fiscal stance on energy because we had to. With two exogenous shocks – Covid-19 and Ukraine – we had to intervene. Our 70-year-high tax burden was also unsustainable.
“I’m confident that with our growth plan and the upcoming medium term fiscal plan – with close cooperation with the Bank – our approach will work.”
His comments came after the pound plunged to a record low on Monday in the wake of his Commons statement last week setting out his plan for £45 billion of tax cuts.
Speaking at the Labour Party conference this morning, the party’s deputy leader Angela Rayner described the Chancellor’s and Prime Minister’s approach to the economy as “so reckless” and a “very risky casino-style gamble”.
She told Times Radio: “The situation at the moment is so grave, the markets are so spooked by what the Conservatives have said on Friday, that actually they really need to get a grip of this because I don’t see how we can go forward certainly up until – the Bank of England are not due to meet until November.
“I really don’t see how we get from where we are now until November in a situation where obviously we need to stabilise the market, we need to make sure that there’s confidence in the programme for the Government, so that we don’t end up in a really serious situation.
“That is my appeal really to the Government, is that this is not just about party political politics, this is really quite serious and it’s going to affect people’s real lives, mortgage, interest rates, day-to-day living costs, all of these things. If you’re not on £155,000 a year or above, you’re going to be worse off as a result of Friday’s budget.”
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