A government minister has denied the falling pound and rising borrowing costs show markets are worried about today’s mini-budget – insisting growth is what matters.
Simon Clarke also rejected warnings that the Growth Plan – to cut taxes by at least £30bn, including a possible stamp duty reduction – is “a gamble” that will reward the rich rather than the poor.
Ahead of the mini-budget, the pound dropped under $1.13 against the dollar and public borrowing costs jumped to their highest level since 2011 – as the Bank of England warned it will trigger further interest rate hikes.
But the levelling up secretary shrugged off the evidence of fear in the financial markets, telling Sky News: “What the markets want to know is whether the UK economy is going to grow.”
Reversing the national insurance hike will hand £3,890 to the highest earners, just £175 to those earning under £50,000 and nothing at all to people paid under £12,750, according to the Treasury’s own figures.
But Mr Clarke said it was “a nonsense” to talk of a return to 1980s-style “trickle-down economics”, condemned by Joe Biden, insisting “a more successful economy is good for everybody”.
And he claimed: “This isn’t a gamble. The weight and history of evidence is with us that a more dynamic economy is unleashed by lowering the burden of tax.”
The financial statement – a budget in all but name – could also see the new government accelerate a 1p income tax cut pencilled in for 2024, or even double it.
The chancellor, Kwasi Kwarteng, will also tear up environmental protections in huge swathes of the UK which will be declared low tax and low regulation “investment zones”.
He will argue that the package can break a “cycle of stagnation” which has seen growth stall and taxes rise – despite the Conservatives having been in power for 12 years.
But economists have warned that the plans and the huge increase in state borrowing required to fund it are putting the nation’s finances on an “unsustainable” path.
The Bank of England has warned the economy is already in recession, after two successive quarters of negative growth, and that higher interest rates are likely to be prompted by the mini-budget.
Mr Clarke insisted: “The prescription here is that we get a better underlying growth that unleashes the tax receipts that will allow us to both grow the economy and also to get on top of that debt.”
He said: “This whole term trickle-down is such a nonsense and is itself a centre-left mischaracterisation of what this government is all about. We need to grow the economy because a more successful economy is good for everybody.”
