LAST UPDATE | 24 Sep 2022
BRITISH PRIME MINISTER Liz Truss has vowed to “usher in a decade of dynamism” as she defended her government’s controversial raft of tax cuts amid criticism it disproportionately benefits the rich.
UK Labour accused the Prime Minister and Chancellor Kwasi Kwarteng of gambling with people’s finances in “casino economics” and said their “trickle-down” approach will leave the next generation worse off.
But Truss insisted she is “unapologetic” in “focusing relentlessly on economic growth”, even as the £45 billion tax-slashing package sent the pound tumbling to fresh 37-year lows.
Using more than £70 billion of increased borrowing, Kwarteng on Friday unveiled the biggest programme of tax cuts for 50 years, including abolishing the top rate of income tax for the highest earners.
He has denied suggestions he is gambling with the UK economy, insisting that the biggest raft of tax cuts for half a century were “absolutely fair” as his mini-budget faced a hostile reception.
The Institute of Fiscal Studies (IFS), a respected London think tank, said Kwarteng was “betting the house” by putting government debt on an “unsustainable rising path”.
The scathing assessment said only those with incomes of over £155,000 will be net beneficiaries of tax policies announced by the Conservatives over the current parliament, with the “vast majority of income tax payers paying more tax”.
British Labour leader Keir Starmer said on Twitter today that “Tory casino economics is gambling the mortgages and finances of every family in the country.
“Labour will secure growth for working people, that benefits all communities.”
Labour’s annual conference is set to kick off in Liverpool tomorrow, with expectations that Starmer will link Conservative decisions to falling living standards and articulate a convincing vision to improve them.
Labour’s call for a heavier windfall tax on the profits of energy and oil giants to fund freezing energy bills – which Ms Truss is paying for by borrowing – will be a key plank of the argument.
But during a visit to a factory in Kent on Friday afternoon, Kwarteng told reporters his plans were “not a gamble.
“What is a gamble is thinking that you can keep raising taxes and getting prosperity, which was clearly not working.
“We cannot have a tax system where you are getting a 70-year high, so the last time we had tax rates at this level before my tax cuts was actually before Her late Majesty had acceded to the throne.”
Reaction in the financial markets was quick and punishing as the pound dived to fresh 37-year lows, making imports more expensive.
Larry Summers, a former US Treasury secretary, warned sterling may sink past parity with the dollar.
“It makes me very sorry to say, but I think the UK is behaving a bit like an emerging market turning itself into a submerging market,” he told Bloomberg.
Asked if a fall in sterling was good for the economy, Kwarteng said: “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.”
The package was announced a day after the Bank of England warned the UK may already be in a recession and lifted interest rates to 2.25%.
That move made Government borrowing more expensive than at any point over the past 13 years.
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