UK Chancellor of the Exchequer Kwasi Kwarteng has promised more tax cuts in his bid for growth after unveiling the biggest ever fiscal giveaway for half a century.
Kwarteng’s package on Friday scrapped the top income tax rate and cut the basic rate by one percentage point, while also reversing the increase in National Insurance payroll tax brought in earlier this year.
“There is more to come,” Kwarteng said on Sunday in a BBC television interview. “We have only been here for 19 days. I want to see, next year, people save more of their income, because I believe that the British people will drive this economy.
The chancellor’s comments suggest Prime Minister Liz Truss’s government will not be deterred by the market turmoil unleashed by the “Growth Plan” – which amounts to a budget in all but name.
“I don’t comment on market movements,” Kwarteng said, while standing behind his plans. “There’s no way we’re going to get more growth just by increasing taxes and taking more money from people,” he said.
His remarks set clear waters between the Tories and Labour, which come after the ruling party this year adopted opposition policies including a windfall tax on energy giants and a freeze on electricity and gas bills. Labor Leader Keir Starmer on Sunday told the BBC he would bring back the high rate of income tax.
While Kwarteng did not elaborate on potential tax cuts in the future, the Telegraph on Saturday reported that he is considering bringing additional deductions on income tax and discounts for savers and child benefit claimants in the full budget next year.
The Treasury put the cost in fiscal announcements on Friday at around £161 billion over the next five years, in addition to the £60 billion price tag of the government’s energy bailout for households and businesses over the next 6 month. That has fueled investor concerns that the approach could fuel even higher inflation and send debt soaring.
But the chancellor told the BBC he was “confident” the Bank of England was tackling runaway inflation and promised to set out in the coming months a “medium-term fiscal plan” including a commitment to fall net debt as a percentage of gross domestic. product.
The Tory approach—which benefits higher incomes more than the poorest Britons—provides fertile territory for Labor “to occupy that central ground,” Labor grandee Peter Mandelson-who served as former Labor Prime Minister Minister Tony Blair’s cabinet, told Sky News on Sunday, as the opposition party began its 4-day annual conference in Liverpool, northwest England.
“The Conservatives are in effect taking their own policy direction from the center ground, the middle ground of British politics,” Mandelson said. “That’s when the majority of voters exist in the country that will determine the outcome of the next election.”
Starmer told the BBC he would reverse the Quartet’s scrapping of the 45% top rate of income tax, imposed on those earning more than £150,000 ($163,000), but maintain the 1-percentage-point reduction in basic rate.
He criticized as “wrong-headed” the argument “that if you just let the rich get richer, somehow that money will flow into the pockets of all of us.”
Former Tory chancellor Ken Clarke backed that view, telling BBC radio on Sunday that he did not believe tax cuts for the richest would stimulate growth. “I’m afraid that’s the kind of thing that Latin American countries often try without success,” he said.
Labor enjoys a comfortable poll lead over the Tories for most of 2022, and on Sunday, a new survey conducted by Savanta ComRes for the website LabourList gave the opposition a 12-point lead over the ruling party. . The poll was conducted before Kwarteng’s statement, and the seat-by-seat analysis shows Labor on course for a 56-seat majority at the next election, which Truss must call in January 2025 at the latest.
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