UK Chancellor of the Exchequer Kwasi Kwarteng sought to calm frayed nerves in his ruling Tory party with a pledge to deliver on the government’s economic strategy just hours after making a humiliating U-turn on a plan to cut taxes on the highest incomes.
“No more distractions,” he told the Tory party conference in Birmingham on Monday. “We have a plan and we have to go ahead.”
Kwarteng’s keynote address to the Tory faithful came after he backtracked on a plan to scrap the 45% income tax rate to head off the growing threat of a party rebellion. He began the speech by remarking: “What a day. It’s been tough, but we have to focus on the job at hand.”
The political reversal, just 10 days after the move was first announced, is a major embarrassment for Kwarteng and Prime Minister Liz Truss. Abolishing the top rate was a signature part of their “growth plan” as they unveiled the biggest set of unfunded tax cuts in half a century in a dramatic fiscal statement on 23 September.
The package sent the market crashing, sending the pound to a record low against the dollar and forcing the Bank of England to intervene dramatically to prevent a market crash.
‘A Little Turbulence’
“I know the plan 10 days ago has caused some turbulence,” Kwarteng said. “We are listening and we have listened and now I want to focus on delivering important parts of our growth package.”
Kwarteng said he plans to press ahead with other elements of his fiscal strategy, including reversing the National Insurance payroll tax hike introduced earlier this year by former chancellor Rishi Sunak, advancing a cut of 1 percentage point in the basic rate of income. tax and scrap Sunak’s plan to raise corporate tax from 19% to 25%.
“This government will always stand by those who need help the most,” he said.
It was an attempt to undo the damage from the original plan on the 45% tax rate, which had caused consternation among some Tory MPs over the apparent unfairness of a tax cut for the rich while poorer Britons struggle for a cost of living crisis. .
At the same time, government ministers have been laying the groundwork for further cuts in public spending, including in welfare payments. Earlier this year, Sunak said benefits would rise in line with inflation by the end of the year, but on Monday Work and Pensions Secretary Chloe Smith told Bloomberg TV it had not yet been taken no decision
This has raised concerns among some former ministers, who warned that they could not sustain any real-term cuts in welfare payments. Esther McVey, a former Smith post holder, said at a side event at the conference that it would be “a huge mistake not to increase cost of living benefits”.
Michael Gove, the former minister who has become an unofficial recruiting sergeant for unhappy Tories, told Times Radio that it would also “take a lot of persuasion” to support benefits not rising in line with inflation .
But Gove indicated he would back the government’s tax measures now that the abolition of the top tax rate had been shelved.
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