British prime minister Liz Truss backs under-fire exchequer chief as tax chaos eases
UK chancellor Kwasi Kwarteng sought to shrug off the chaos that triggered his astonishing U-turn on income tax cuts for the highest earners as a “little turbulence” as he battled to regain authority.
Mr Kwarteng remarked it had been a “tough” day as he told Conservative members in his set-piece conference speech yesterday to “focus on the task in hand”.
Downing Street was forced to reassure that UK prime minister Liz Truss still backs her chancellor after they abandoned their plan to scrap the 45pc rate for earnings over £150,000 to stave off a Tory revolt.
The U-turn, coming just over a week after the cut was announced in the mini-budget and just a month into Ms Truss’s premiership, was a huge blow to their authority.
With Ms Truss in the audience, Mr Kwarteng told the Birmingham conference: “What a day. It has been tough but we need to focus on the job in hand. We need to move forward, no more distractions, we have a plan and we need to get on and deliver it.”
Making light of the chaos in a 20-minute speech containing no new policies, he said to muted laughter from party members: “I can be frank. I know the plan put forward only 10 days ago has caused a little turbulence.
“I get it. I get it. We are listening and have listened, and now I want to focus on delivering the major parts of our growth package.”
Opposition MPs accused the chancellor of “laughing” at the chaos, with Labour warning of a “huge economic body blow to working people that will mean higher prices and soaring mortgages”.
Despite £65bn (€75bn) of Bank of England action to stave off fresh financial turmoil and the pound having plummeted over his mini-budget on September 23, Mr Kwarteng insisted that the Tories will be “serious custodians of the public finances”.
He insisted the Conservatives will “always be on the side of those who need help the most” despite tax policies favouring the rich more than the rest of society.
Hours earlier, in announcing the U-turn, the chancellor of the exchequer acknowledged the UK government’s desire to borrow billions to axe the top income tax rate had become a “terrible distraction”.
Mr Kwarteng said he had “not at all” considered resigning.
Asked if Ms Truss has confidence in her chancellor, the prime minister’s spokesman told reporters: “Yes.”
A day after defending the policy, business secretary Jacob Rees-Mogg also stood by Mr Kwarteng, saying “of course he shouldn’t resign” and insisting it was not a “handbrake turn”.
“It was a political reality. Sometimes things we want to do don’t receive the approbation of the nation that you would hope for,” he said.
“There is no point in sticking with them stubbornly if there simply isn’t the desire and appetite to do them. We live in a democracy and politicians have to be responsive to the democratic will.”
Mr Rees-Mogg said the climbdown was a “sound and fury that signifies nothing”, arguing it was the tax cut that would have lost the Treasury the least amount of money.
Paul Johnson, the director of the Institute for Fiscal Studies think tank, said the reversal of the policy that would have cost £2bn a year was only a “rounding error in the context of public finances”.
With around £43bn of unfunded tax cuts remaining, Mr Johnson said: “The chancellor still has a lot of work to do if he is to display a credible commitment to fiscal sustainability. Unless he also U-turns on some of his other, much larger tax announcements, he will have no option but to consider cuts to public spending: to social security, investment projects or public services.”
The chances of a Commons revolt diminished, with former cabinet minister Michael Gove suggesting he could now support the package. Fellow potential rebel Grant Shapps also welcomed the U-turn.
The chancellor declined to apologise to the nation for the financial turmoil and rising mortgage rates and to Tory MPs who had been warned they could be kicked out of the parliamentary party for voting against the tax plans.
The pound hit $1.13, recovering to levels seen before the mini-budget.