Under-fire Chancellor Kwasi Kwarteng will attempt to ease anxieties following his ‘disaster’ mini-budget in a key speech tomorrow.
The Tory will seek to calm the markets, defend his plan to boost UK economic growth and secure his position as Chancellor as he speaks to Conservative Party members in Birmingham.
His mini-budget triggered financial turmoil, was criticised by the International Monetary Fund and resulted in a £65 billion emergency intervention by the Bank of England to restore order.
But Mr Kwarteng will tell audience members on Monday that ‘we must stay the course’ with his plans to avoid a future of ‘slow, managed decline’.
The plan to axe the 45% income tax rate for top earners and scrap the curbs on bankers’ bonuses at a time when many households face a cost-of-living crisis has been condemned by political opponents and Tory critics, with Mr Kwarteng bearing the brunt of the criticism.
Prime Minister Liz Truss was accused of throwing Mr Kwarteng under a bus by singling him out as responsible for the tax cut, saying ‘it was a decision the Chancellor made’, rather than one debated by the entire Cabinet.
In his speech in Birmingham, Mr Kwarteng will insist the gamble made by the Tories to cut taxes and axe red tape in the hope of increasing economic growth to an annual trend of 2.5% was the correct approach.
And he will highlight the strength of the dollar as a problem facing all economies, rather than one confined to the UK, which saw the pound fall to a record low against the US currency after the mini-budget before regaining ground.
He will say that ‘major currencies’ are ‘wrestling an incredibly strong US dollar’.
The speech will be keenly watched in the City of London although it is expected to be delivered around 4pm, shortly before the markets close.
Mr Kwarteng will say: ‘I refuse to accept that it is somehow Britain’s destiny to fall into middle income status or that the tax burden reaching a 70-year-high is somehow inevitable.
‘It isn’t, and shouldn’t be.
‘We needed a new approach, focused on raising economic growth.
‘That is the only real way to deliver higher wages, more jobs, and crucially, revenue to fund our precious public services and it is the only way to achieve long-term fiscal sustainability.
‘We must stay the course. I am confident our plan is the right one.’
Mr Kwarteng will say his plan is ‘sound, credible and will increase growth’, making that ‘my promise to the people of this country’.
Setting out his ‘new economic deal’ he will attempt to convince lenders that he has a plan to manage the Government’s debt with an ‘iron-clad commitment to fiscal discipline’.
The Government will be “wholly committed to economic growth”, delivering “more businesses, more jobs, higher pay” and ultimately “more money for public services”.
But his speech comes with Ms Truss failing to rule out cuts in public spending to help balance the books and the possibility of benefits facing a real-terms cut as earners on more than £150,000 see their taxes slashed.
Mr Kwarteng will say: ‘You cannot have a strong NHS without a strong economy. You cannot have good schools without a strong economy. You cannot have quality infrastructure without a strong economy.
‘With this plan, we are aiming for 2.5% annual trend growth. We did it before. We can do it again.’
The Chancellor is expected to set out further details of his reforms, including the so-called ‘Big Bang 2.0’ package of financial regulation, within the coming weeks ahead of a ‘medium-term fiscal plan’ on November 23, which will be accompanied by the Office for Budget Responsibility’s forecasts.
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