Liz Truss plans to radically reshape the UK economy with even more tax cuts and fewer regulations, her chancellor has said, declining to set a limit on how much public debt could be incurred in the process.
“There’s more to come,” Kwasi Kwarteng told BBC One’s Sunday with Laura Kuenssberg, two days after his unofficial budget delivered £45bn of tax cuts, mainly for the rich.
“We’ve only been here 19 days. I want to see, over the next year, people retain more of their income,” he said.
Kwarteng dismissed the negative reaction of the money markets to his mini-budget and the amount of borrowing it will involve, and said he was confident the Bank of England would be able to keep a grip on inflation.
He also denied his tax cuts predominantly favoured those on higher incomes. “They favour people right across the income scale,” he said.
Challenged over how a government with no new mandate could embark on such a radically different course, the chancellor said he was certain the public supported his ideas.
Asked about fiscal plans that will add about £400bn to public borrowing over the coming years, Kwarteng said he was committed to debt as a proportion of GDP falling over time, but gave no details as to how or when.
“Obviously, you can’t borrow for ever, and that’s why on Friday I was very specific, very careful, to say that we’re going to have a medium-term fiscal plan,” he said, arguing that the government had to respond to the economic shocks of Covid and Russia’s invasion of Ukraine.
“We had two multigenerational unprecedented events,” he said. “There’s no way that a government shouldn’t respond in a fiscally expansive way, in a way that we can support the economy, support our people through these two unprecedented shocks.“All I would say on borrowing is we’ve managed to respond to two of what they call exogenous shocks that were not in our control and were of unprecedented scale, and that was absolutely the right thing to do.”
Asked if there was a limit to the new borrowing, Kwarteng replied: “What I’m not going to do is to say that if there is an exogenous, extreme event I can’t possibly say we won’t borrow to deal with that.”
The chancellor agreed with Kuenssberg when asked if Truss’s government hoped to implement what previous Conservative governments, including Boris Johnson’s, had deemed unthinkable in terms of tax cuts and deregulation.
“It’s absolutely our focus,” he said. “The only way we are going to pay for our public services in the future, the only way we’re going to have the kind of economy we want, is by growing this economy. And that is what I, the prime minister and the government is 100% focused on.”
Some Conservative MPs have voiced disquiet over the new approach, a view echoed on Sunday by the former chancellor Ken Clarke, who told the BBC that tax cuts for the rich was “the kind of thing that’s usually tried in Latin American countries without success”.
Kwarteng did not rule out loosening some immigration rules to provide more overseas workers, or possible changes such as ending EU rules on maximum working hours, but said these were a matter for cabinet colleagues.
Asked how he felt able to pursue policies so different to the 2019 Conservative manifesto when only Tory party MPs and members had selected Truss, Kwarteng said only that it was “very clear to me that people don’t want to see the tax burden going up indefinitely”.
Challenged again on whether he had public consent for such radical changes, he said: “We have a responsibility in government to protect everybody and to make Britain the best it can be, and I think economic growth is absolutely essential to that.”
Kwarteng declined to discuss the slide in the value of sterling after his statement on Friday, with the pound tumbling to a 37-year low, below $1.09. “As chancellor of the exchequer, I don’t comment on market movements,” he said.
According to the Sunday Telegraph, some Conservative MPs could revolt if sterling reaches parity with the dollar, seeing this as a signal for action. Some could vote against the finance bill bringing in the tax cuts, or even send letters of no confidence in the prime minister, the paper predicted.
