Kwarteng defends controversial tax cuts as some Tories 'deeply uncomfortable' about mini-budget

23 September 2022, 20:00 | Updated: 23 September 2022, 22:26

Kwasi Kwarteng has defended his mini-budget, featuring a raft of massive tax cuts, as one Tory peer claimed some in the party were "deeply uncomfortable" with the give-aways.

There have been warnings that Liz Truss's tax cuts are a "gamble" at a time when Britain is facing an economic storm of inflation, the cost-of-living crisis and the possibility of already being in recession.

There are fears that the tax cuts are too beneficial to the wealthiest in Britain when so many are struggling and the amount of borrowing needed to sustain the budget given reduced tax revenues.

A YouGov survey found 63% of 9,400 adults surveyed believed the new measures will help wealthier people more, with just 3% thinking the poorer would benefit more and just 9% believing it would help both groups equally.

A total of 52% believe they will not help grow the economy.

But despite the pound's slump and the public polling, Mr Kwarteng – speaking after his mini-budget was delivered to MPs – said Friday was a "very good day for the UK".

"We're very, very upbeat about what we can do as a country. We were facing low growth and we want a high-growth economy and that's what this morning was all about," he said.

Mr Kwarteng said of the pound: "I don't comment on market movements but what is good for the economy is creating an environment where people can come and invest in the UK and that's exactly what we've done."

And he added: "It's absolutely fair to reduce people's taxes and to make sure, as you've admitted, that people are going to retain more of what they earn.

"The path we were on was simply unsustainable. We couldn't simply raise taxes indefinitely and hope that we would get prosperity."

Ms Truss tweeted: "Growth is key to delivering more jobs, higher pay and more money to fund public services, like schools and the NHS.

"Our Growth Plan sets out how we are going to rebuild our economy and deliver for the British people."

Lord Barwell, a Tory peer who previously served as Theresa May's chief of staff during her time in No10, tweeted strong views after the budget.

"This wasn't a mini Budget. Taxes were too high, but cutting my taxes while doing nothing for those on Universal Credit is wrong.

"Funding this by borrowing more when debt interest is already at record levels is reckless. Looser fiscal policy is going to mean higher interest rates."

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Conservative MPs uncomfortable with the mini-budget

He later told Tonight with Andrew Marr that to "see a tax package that is so slanted in favour of the wealthiest people in the country I think is unconscionable".

He had not spoken to Tory MPs about how they will vote on the measures, he said, but referring to his angry tweet, he added: "I can say to you that Conservative MPs have contacted me… and expressed sympathy for that view.

"So there are definitely people within the party who are deeply uncomfortable about some of the things the Chancellor had to say today.

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"There are good measures in this budget but the overall package is overshadowed by both this unfairness that I was talking about and the recklessness in fiscal terms."

The Government says it wants to promote growth with its heavy tax cuts.

The pound slumped against the dollar as Mr Kwarteng gave his statement to MPs, declining by as much as 0.89% to 1.115 US dollars.

The key measures announced today:

• Income tax: Basic rate will be cut by 1p to 19p and the 45p rate for top earners will be abolished from April 2023

• Stamp duty: The threshold for paying stamp duty was doubled to £250,000 - and for first time buyers it's been upped to £425,000

• Corporation tax: Planned rise from 19 to 25 per cent is scrapped

• National insurance: 1.25 per cent increase scrapped from November 6

• Bankers' bonuses: Cap axed

• Alcohol duty: Planned increase for beer, cider, wine and spirits all cancelled, coming into effect in February 2023

Read more: Kwasi takes axe to tax: Chancellor slashes £45billion off burden with biggest tax cuts since 1972

The Government said it wants to talk about growing the size of the economy instead of discussing how it should be divided up.

Labour's shadow chancellor Rachel Reeves said: "The Chancellor has made clear what his priorities are. A return to the trickle down of the past, not a brave new future.

"This is casino economics - gambling the mortgages and finances of every family in the country.

"It is reckless, and it is irresponsible."

Liberal Democrats leader Sir Ed Davey said the Chancellor's mini-budget showed the Government was "totally out of touch" with the public and that investors are “very worried” about the new economic policies.

The Institute for Fiscal Studies director Paul Johnson said: "Mr Kwarteng has shown himself willing to gamble with fiscal sustainability in order to push through these huge tax cuts.

"He is willing to shrug off the risks of inflation, and to invite significantly higher interest rates. Injecting demand into this high-inflation economy leaves the government pulling in the exact opposite direction to the Bank of England, who are likely to raise rates in response.

"Early signs are that the markets - who will have to lend the money required to plug the gap in the government's fiscal plans - aren't impressed. This is worrying."