'We must stay the course': Kwarteng stands firm on tax cuts despite threat of Tory rebellion

2 October 2022, 23:29 | Updated: 3 October 2022, 07:45

Chancellor Kwasi Kwarteng is set to stand firm on tax cuts in his keynote speech at the Tory party conference, despite the looming threat of a Tory rebellion.

The Chancellor's mini-budget triggered turmoil, with the pound plummeting and the Bank of England being forced to make a £65 billion emergency intervention to restore order.

But Mr Kwarteng will tell activists 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.

Read more: Liz Truss admits she’s 'learned' from Budget turmoil but insists 'status quo' is not an option

Read more: Ex-minister Michael Gove blasts Truss over 'non-Conservative' plans to pay for tax cuts with borrowing

However, the move has led to growing concerns of a Tory rebellion.

Ex Levelling Up minister Michael Gove earlier said he was "profoundly" concerned about the £45 billion's worth of tax cuts, particularly the abolition of the top income tax rate.

He told the PM there is an "opportunity for a course correction and a reset", adding: "I've never voted against the Conservative whip and I want therefore to make sure that we can have a civilised conversation about priorities."

Meanwhile, former Transport Secretary Grant Shapps has warned Ms Truss not to have a "tin ear" to voters' concerns about rising living costs and to do a U-turn as soon as possible.

"Let's not muddy the water with... tax cuts for wealthy people right now, when the priority needs to be on everyday households," he told the BBC.

MPs are not expected to get a chance to vote on the changes until next spring, but Mr Shapps suggested enough Tory MPs would join forces with Labour and other opposition parties to defeat it.

"I don't think the House is in a place where it's likely to support that," he said.

Despite concerns within the party, Mr Kwarteng is set to insist his plan is "sound, credible and will increase growth", making that his "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".

He 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's speech will come after Ms Truss failed 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.

She also said she had "learned" from the economic fallout sparked by her mini-budget but warned MPs that "status quo" is not an option for the nation’s finances.

She told Tory rebels urging her to abandon her controversial tax cutting agenda that she will not change course, saying "the status quo isn't an option".

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.