Kwasi Kwarteng has said he will focus on “delivering the major parts of our growth package” in the wake of his U-turn on tax cuts for the UK’s highest earners, while insisting his plans are “not irresponsible”.
The chancellor moved to calm Tory party fears about the U-turn and said his mini-Budget 10 days ago “has caused a little turbulence”, but that “we are listening, and have listened”.
Kwarteng and Prime Minister Liz Truss announced this morning that they were scrapping the planned abolition of the top 45p rate of Income Tax, because it had become a “distraction” from the rest of their plan.
The stunning U-turn came after the fiscal pacakge caused the pound to crash against the US dollar and a deep sell-off of UK Treasury bonds.
Sterling has since rebounded and is at similar levels against the US dollar as it was before the fiscal package, however long-term bond yields are still far higher.
Kwarteng opened his speech at the Conservative conference by quipping: “What a day!”
“People should keep more of the money they own. That isn’t radical, that isn’t irresponsible, it is a deeply-held belief that we all share as Conservatives,” he said.
“What Britain needs more than ever is economic growth and the government wholly committed to economic growth. That is why we will forge a new economic deal for Britain, backed by an ironclad commitment to discipline.”
In a speech that lasted around 20 minutes, Kwarteng said he and Liz Truss had to act as the “path ahead of us was one of slow managed decline”.
“We were faced with a 70-year high tax burden. We were confronted with low growth. And the path we were on was unsustainable,” he said.
“So that’s why we’re cutting taxes for working people. That’s why we’re cutting National Insurance. We needed a new approach, focussed on raising our growth,” he said.
“Because that is the only real way to deliver opportunities, to deliver more jobs and crucially … our cherished public services.”
The government U-turned following vocal opposition from former cabinet ministers Michael Gove and Grant Shapps.
Shapps called the tax cut “politically tin-eared cut” and “not even a huge revenue raiser and hardly a priority on the prime ministerial to-do list”.
Other Tory MPs were also planning on voting against the measure, with Truss potentially facing a humiliating parliamentary defeat.