Kwarteng promises Truss will be ‘tax responsible’ if named PM

Kwasi Kwarteng, who has been tipped as Britain’s next chancellor, has made a pre-emptive bid to reassure markets that Liz Truss won’t blow a hole in public finances if, as widely expected, she becomes prime minister on Monday. appointed.

Kwarteng writes in the Financial Times that although there will have to be “some fiscal easing”, the new government would act “tax responsible”. Truss’s allies admitted that the Treasury’s fiscal framework would be revised once the latest data was reviewed, “given the severity of the economic shocks we face”.

Kwarteng would review the key fiscal rule that debt must fall as a share of national income in the third year of the forecast period to ensure it still works for the economy, they said.

The Treasury may suspend its fiscal rules in the event of a “significant negative shock to the UK economy” under the Charter of Fiscal Responsibility, the framework for sustainable public finances.

If elected, Truss, the Secretary of State, has promised to work out “action on energy bills and energy supply” immediately.

Rishi Sunak, the former chancellor, has warned that his rival for the Tory leadership would “add oil to the fire” of inflation — which hit 10 percent in July — and could disrupt markets by borrowing tens of billions of pounds for non-payment. -funded tax cuts.

But Kwarteng, the current corporate secretary, said a Truss government would be “brave” to promote growth and denounced the “old old economic managerialism that has left us with a stagnant economy”.

He said a Truss government would cut taxes – reversing Sunak’s increases in national insurance and corporate taxes would cost around £30 billion – and provide short-term relief to families and businesses faced with rising energy bills.

“Given the severity of the crisis we are facing, some fiscal easing will be needed to help people through the winter,” Kwarteng wrote. But he said Britain could afford to borrow more and that of the G7 countries, only Germany had a lower debt-to-GDP ratio.

He added: “Liz is aiming for a lean state and if the immediate shock wears off, we will work to reduce the debt-to-GDP ratio over time.”

Kwarteng and Truss have prioritized cutting taxes — which they claim will boost growth — over questions about how benefits are shared between rich and poor. Truss said it was wrong to see all economic policies through “the lens of redistribution.”

Truss told the BBCs Laura Kuenssberg on Sunday that it was “reasonable” that her planned cut in national insurance would save a person working full-time on the minimum wage £59 a year, while a person making £100,000 would save more than £1,000.

Truss said wealthy people paid more taxes and argued that lowering taxes would boost growth and benefit everyone. Kwarteng wrote in the FT: “It’s about increasing the size of the UK economy, not burying our heads in a redistributive battle over what’s left.”

David Gauke, a former Tory treasury secretary, said this approach involved “very significant risks” at a time when low-income families, many of whom voted conservative for the first time in 2019, were facing a crisis. in the cost of living.

If elected on Monday, Truss will announce her new cabinet on Tuesday, after meeting the Queen at her Balmoral estate in Scotland. James Cleverly, the Secretary of State, is said to be promoted to Secretary of State by Truss’s team, while Suella Braverman, the Attorney General, is tipped to become Secretary of the Interior.

Jacob Rees-Mogg, another major Truss supporter, is expected by her team as company secretary responsible for energy.

The results of the seven-week competition to find a new Conservative leader will be announced over lunch Monday. Boris Johnson will make a farewell statement in Downing Street on Tuesday morning before flying to Balmoral to tender his resignation.

Writing in the Sunday TelegraphTruss reiterated her promise of tax cuts for businesses and households, but also said: “I will take decisive action to ensure that families and businesses get through this winter and into the next.”

Rising inflation, the rising cost of public debt and Truss’ promises on tax cuts and defense spending will create a £60 billion gap in public finances by the middle of the decade, FT estimates.

Truss said she wanted to move away from a “paste band-aid and kick the can in the road” approach and her allies have talked about energy market reforms to reduce the impact on future crises.