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UK Chancellor of the Exchequer Kwasi Kwarteng has promised more tax cuts in the pursuit of growth after unveiling the biggest fiscal gift in half a century.
Kwarteng’s package on Friday scrapped the top level of income tax and reduced the basic rate by a percentage point, while reversing an increase in the National Insurance payroll tax introduced earlier this year.
“There’s more to come,” Kwarteng said Sunday in a television interview with the BBC. “We’ve only been here 19 days. I want to see, over the next year, people keep more of their income, because I believe the British people are going to drive this economy.”
The Chancellor’s comments suggest that Prime Minister Liz Truss’s government will not stop the market chaos unleashed by her “Growth Plan” — which was a budget in all but name.
“I don’t comment on market movements,” Kwarteng said, standing by his plans. “There was no way we were going to get more growth by increasing taxes and taking more money,” he said.
His comments establish clear water between the Tories and Labour, coming after the ruling party this year embraced opposition policies including a windfall tax on energy giants and a freeze on domestic power and gas bills. Labor leader Keir Starmer told the BBC on Sunday that he would bring back the top rate of income tax.
While Kwarteng did not elaborate on possible future tax cuts, the Telegraph reported late on Saturday that he was considering introducing further reductions in income tax and discounts for savers and child benefit claimants in next year’s overall budget.
The Treasury put the cost of the fiscal announcements on Friday at around £161 billion over the next five years, as well as the £60 billion price tag of the government’s energy bailout for households and businesses over the next 6 months. That has fueled investor concerns that the approach will stoke already rising inflation and balloon debt.
But the chancellor told the BBC he is “confident” the Bank of England is dealing with runaway inflation and promised to set out a “medium-term fiscal plan” in the coming months including a pledge to get net debt down as a percentage of gross domestic income. product.
The Tories’ approach – which benefits far more than the poorest Britons – provides fertile ground for Labor to “occupy that centre,” said Labor senator Peter Mandelson – who served in cabinet former Labor Prime Minister Tony Blair, to Sky News. Sunday, as the opposition party begins its annual 4-day conference in Liverpool, north-west England.
“The reality is that the Conservatives are taking their own policy direction out of the centre, the center of British politics,” said Mandelson. “That’s where the majority of voters in the country are going to decide the outcome of the next election.”
Starmer told the BBC he would reverse Kwarteng’s abolition of the top 45% income tax, levied on those earning more than £150,000 ($163,000), but would retain the 1 percentage point reduction in the basic rate.
He said the argument that “if you let the rich get richer, somehow that money will end up in the pockets of the rest of us” was “misguided.”
Former Tory chancellor Ken Clarke backed that view, telling BBC radio on Sunday that he did not believe cutting taxes for the wealthiest would stimulate growth. “I’m afraid that’s the kind of thing that is usually done in unsuccessful Latin American countries,” he said.
Labor has enjoyed a comfortable poll lead over the Tories for most of 2022, and on Sunday, a new survey by Savanta ComRes for the website LabourList gave the opposition a 12-point lead over the ruling party. The poll was carried out before Kwarteng’s statement, and a seat-by-seat analysis showed Labor on course for a 56-seat majority at the next election, which Truss must call by January 2025 at the latest.
(Updates with comment from former chancellor Clarke in paragraph 14)
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