Kwasi Kwarteng will send out a defiant message on Monday to Tory critics begging him to back down on his Budget package of tax cuts for the rich, declaring: “We must stay the course. I am confident our plan is the right one.”
In a speech to the Conservative conference in Birmingham that will be closely watched in the financial markets, the chancellor will insist that his £45bn giveaways provide the foundation for growth in the UK economy and are “the only way to achieve long-term financial sustainability”.
Despite spooking the markets by failing to explain how he will fund the tax cuts, Mr Kwarteng will claim his plan is backed by an “iron-clad commitment to fiscal discipline”.
The chancellor’s stance represents a high-stakes gamble after his package was blasted by one MP as “inept madness” and another called it “electoral suicide”.
Any adverse response from the markets will add to the intense pressure on both the chancellor and prime minister Liz Truss to back down on the most toxic element of the plan, the abolition of the 45p top income tax band for earnings over £150,000.
Former chancellor George Osborne said it was “touch and go” whether Kwarteng would survive, telling Channel 4’s Andrew Neil Show it would be “curtains” for the chancellor if his speech was badly received.
And former cabinet minister Nadine Dorries said Ms Truss had already made clear she was ready to “throw the chancellor under a bus” after the prime minister told the BBC the top-rate cut was decided by Kwarteng.
Mr Kwarteng is expected to say that, without “a new approach” from government to boost economic growth, the UK was destined to follow a path of “slow, managed decline”.
He will repeat his target of 2.5 per cent annual GDP growth, which was regularly achieved under the Labour governments of Tony Blair and Gordon Brown, but has been reached only three times under the Tory-led administrations that have followed.
And he will say that it was unacceptable for the UK’s overall tax burden as a proportion of GDP to hit a 70-year high, as planned by his Conservative predecessor Rishi Sunak.
He will tell the conference: “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.”
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And he will turn his face against ever-louder calls from Tory MPs for a U-turn on the 45p rate and the abolition of the cap on bankers’ bonuses, saying: “We must stay the course. I am confident our plan is the right one.”
Mr Kwarteng will tell the conference that Britain should not accept a fate of high taxes, slowing long-term growth rates and “painfully slow” delivery of infrastructure projects.
“What Britain needs is economic growth and a government wholly committed to economic growth,” he will say.
“That is why we will forge a new economic deal for Britain, backed by an iron-clad commitment to fiscal discipline.”
Growth will deliver more businesses and jobs, and higher pay, and is a necessary condition for a strong NHS, good schools and quality infrastructure, he will tell activists.
“With this plan, we are aiming for 2.5 per cent annual trend growth,” the chancellor will say. “We did it before. We can do it again.
“And even in the face of extreme volatility in global markets, with major currencies wrestling an incredibly strong US dollar and longer-term trends from demographic change to climate change, we will show that our plan is sound, credible and will increase growth.
“That is my promise to the people of this country.”
