Michael Gove has savaged Liz Truss and Kwasi Kwarteng’s recent mini-Budget, labelling the debt-funded tax cuts as “not Conservative”.
The Tory big beast said the package – which included an abolition of the top 45p band of Income Tax were a “display of the wrong values” and he refused to commit to voting for them in parliament.
Truss and Kwarteng’s mini-Budget included an abolition of the top 45p rate of Income Tax, a reversal of this year’s National Insurance rise and a plan to bring the 1p cut to the basic rate of Income Tax forward to 2023.
The fiscal statement led to a large sell-off of UK Treasury bonds, sending yields on the gilts soaring, and a slump in the value of the pound against the US dollar as investors were spooked by the £70bn in debt-funded tax cuts.
The pound has since recovered in reaction to the Bank of England’s decision to spend £65bn in stabilising the UK’s bond market, after a series of British pension funds almost collapsed on Wednesday.
Gove said he was “profoundly” concerned by the tax cuts and called for their reversal.
“There needs to be a recognition of mistakes, but it is still the case … I think of an inadequate recogniton at the top of government of the scale of change required,” Gove said.
“There are two things that are problematic, two major things that were problematic. The first is the sheer risk of using borrowed money to fund tax cuts. That is not Conservative.
“The second thing is to cut the 45 pence tax rate and at the same time to change the law which governs how bankers are paid in the City of London.”
Truss said that she should have “laid the ground better” for the tax cuts, but said she would not reverse the package.
“I’m confident it will deliver,” Truss said.
“I’m not saying it’s not going to be difficult – we do face a very turbulent and stormy time, but it will deliver. It will deliver on the promises we made and in the circumstances I’m very clear we had to act very quickly to get that plan going.”
It is now expected Kwarteng will unveil spending cuts to calm markets, with Tory party chair Jake Berry today saying government must “manage expenditure” in the same way households need to manage their budgets.
Truss refused to rule out spending cuts today several times.