Kwasi Kwarteng has not ruled out a U-turn on corporation tax amid growing pressure to abandon more elements of the mini-budget that has caused market turmoil.
Earlier on Thursday the Chancellor said he was “totally focused” on delivering the tax-cutting plans, which are aimed at increasing UK economic growth, and stressed he was not abou to quit as chancellor.
But in later comments to the Telegraph newspaper, when asked about the expectation from financial markets that the Government could ditch the plan not to increase corporation tax in order to demonstrate a commitment to balancing the books, he said: “Let’s see.”
It was his strongest indication yet of a possible change of course.
Reports earlier suggested talks are under way between No 10 and the Treasury on abandoning elements of the £43 billion tax-cutting plan, including the commitment to axe the planned increase in corporation tax. He has already climbed down on his plan to axe the 45p top rate of income tax.
Downing Street said “work is ongoing between the Chancellor and the Prime Minister, as you’d expect, ahead of the medium-term fiscal plan” but a spokeswoman refused to be drawn on the nature of the discussions or the possible scrapping of the corporation tax commitment.
Mr Kwarteng, in Washington for the International Monetary Fund’s annual meeting, was repeatedly asked by broadcasters about the prospect of a U-turn and did not explicitly rule it out.
He insisted “our position hasn’t changed”, adding: “I will come up with the medium-term fiscal plan on October 31, as I said earlier in the week, and there will be more detail then.”
Asked if a corporation tax U-turn was on the cards, he said: “What I’m totally focused on is delivering on the mini-budget.”
With talks on ditching his plans rumoured to be taking place in London while he was on the other side of the Atlantic, Mr Kwarteng insisted his position was safe.
Asked if both he and Prime Minister Liz Truss would still be in office in a month, Mr Kwarteng said: “Absolutely 100%. I am not going anywhere.”
He told broadcasters: “I speak to No 10, I speak to the Prime Minister all the time. We are totally focused on delivering the growth plan.”
But The Times reported last night that Senior Conservatives were holding talks about replacing Ms Truss with a “unity candidate” in a fresh leadership contest.
Mr Kwarteng acknowledged the UK suffered some “turbulence” following his mini-budget but said the economy was facing the same problems as other countries around the world.
“What I am going to acknowledge is the fact that it is a very dicey situation globally,” he said.
Yet Mr Kwarteng also insisted to the Telegraph that there would be “no real cuts to public spending”, appearing to double down on comments made in the Commons by the Prime Minister on Wednesday.
“Let’s face it, there are difficult choices within that you have to prioritise.
“You have to make sure that you know the public is getting value for money. And I make no apologies for that, there has to be some sort of fiscal discipline,” he told the paper.
But the managing director of the International Monetary Fund (IMF) hinted that Mr Kwarteng might need to change course.
With high inflation, people facing a cost-of-living crisis & many countries saddled with debt, fiscal policy must "thread the needle": prioritize targeted support to protect the vulnerable and a tight fiscal stance to help fight inflation. #FiscalMonitor https://t.co/BdPQq1pXwN pic.twitter.com/3dxRUTWqs7
— Kristalina Georgieva (@KGeorgieva) October 12, 2022
Speaking at a press conference in Washington, Kristalina Georgieva said: “Our message to everybody, not just the UK, is that at this time, fiscal policy should not undermine monetary policy.”
She added that “it is correct to be led by the evidence, so if the evidence is that there has to be a recalibration, it’s right for governments to do so”.
Former chancellor George Osborne suggested Mr Kwarteng should not delay until his October 31 statement before making the “inevitable” U-turn on his plans while former home secretary Priti Patel became the latest Tory MP to suggest that the Government could be forced into a reversal.
She told Sky News: “Market forces will probably dictate some of these changes now.”
Given the pain being caused to the real economy by the financial turbulence, it’s not clear why it is in anyone’s interests to wait 18 more days before the inevitable u-turn on the mini budget
— George Osborne (@George_Osborne) October 13, 2022
Mr Osborne said: “Given the pain being caused to the real economy by the financial turbulence, it’s not clear why it is in anyone’s interests to wait 18 more days.”
The scale of the backlash to the mini-budget has led to speculation that the Prime Minister’s own position could be in jeopardy.
She endured a rough ride at a meeting of the 1922 Committee of Tory backbenchers and the editor of the influential ConservativeHome website, Paul Goodman, suggested there has been rumours about replacing Ms Truss with a joint ticket involving her former leadership rivals Rishi Sunak and Penny Mordaunt.
On Thursday newly elected Foreign Affairs Committee Chair Alicia Kearns told LBC’s Tonight With Andrew Marr that she wanted the Prime Minister to succeed but added her voice to calls for a change of course on the mini-budget.
“The markets are not woke, the markets are not left. The fact they are not lefty, anti-government, the fact they have been spooked, is something that should be taken incredibly seriously.”
Earlier Foreign Secretary James Cleverly told BBC Radio 4’s Today programme: “I think changing the leadership would be a disastrously bad idea politically and also economically.”
"Changing the leadership would be a disastrously bad idea, not just politically but economically"
— BBC Radio 4 Today (@BBCr4today) October 13, 2022
Foreign Secretary James Cleverly tells @MishalHusain the government recognises it needs to bring certainty to the markets, and defends its growth plans.https://t.co/klR00bNQuK pic.twitter.com/nSdBjiQKy7
The Government’s plans revolve around securing an increase in economic growth – with a target of an annual rise of around 2.5% in gross domestic product (GDP).
The forecasts presented by the Office for Budget Responsibility (OBR) alongside the Chancellor’s October 31 statement will give an assessment on whether that is viewed as a realistic ambition.
But Business Secretary Jacob Rees-Mogg has suggested the Government could ignore OBR forecasts accompanying the strategy if they predict low growth and rising debt.
Downing Street, however, said Ms Truss has confidence in the data produced by the OBR, which remains the Government’s official forecaster.
“The Prime Minister has said on a number of occasions that she values their scrutiny and respects their independence. They are a highly regarded body worldwide,” the Prime Minister’s official spokesman said.
In response to speculation about a possible U-turn on corporation tax, the Liberal Democrats called for Mr Kwarteng to resign.
Lib Dem leader Sir Ed Davey said: “This U-turn would come too late for many struggling families facing mortgage misery.”
For Labour, shadow chancellor Rachel Reeves said: “Today’s mess shows the utter chaos this Government is in. This is a crisis made in Downing Street and working people are paying the price.”
