Kwarteng 'confident' tax-cutting strategy right approach despite pound slump

Chancellor Kwasi Kwarteng
Chancellor Kwasi Kwarteng

CHANCELLOR Kwasi Kwarteng has insisted he is “confident” his tax-cutting policy is the right way forward despite his mini-budget sending the pound plummeting.

Kwasi Kwarteng’s strategy to cut tax for the super-rich, as well as the tax base rate and stamp duty in England, announced on Friday, sent the pound to its lowest ever rate against the UK dollar yesterday.

The director of the IFS, Paul Johnson, accused Mr Kwarteng of being “willing to gamble with fiscal sustainability”, adding that he was “not just gambling on a new strategy, he is betting the house”.

The Chancellor has resisted calls from politicians to make a statement in the Commons.

But he has moved to reassure the markets over his plans.

Speaking at a meeting with city investors, Mr Kwarteng said: “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.

“Cabinet ministers will set out more supply-side measures over coming weeks to make meaningful change. Right across Government, departments have to be focussed 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 23 November, alongside an OBR forecast. That will be a credible plan to get debt to GDP falling.”

The Chancellor told city investors that he believed the approach of the UK Government “will work” and promised “close co-operation” with the Bank of England.

It comes after the Bank of England said it would not hesitate to further raise interest rates above the current 2.25% if necessary amid criticism of the UK Government that its strategy is pulling in the opposite direction from the bank.

Mr Kwarteng said he was in daily dialogue with the governor of the Bank of England and they were “working closely together”.

He added: “We have responded in the immediate term with 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 co-operation with the Bank – our approach will work.”