Liz Truss has vowed to “usher in a decade of dynamism” as she defended her Government’s controversial raft of tax cuts amid criticism it disproportionately benefits the rich.
Labour accused the Prime Minister and Chancellor Kwasi Kwarteng of gambling with people’s finances in “casino economics” and said their “trickle-down” approach will leave the next generation worse off.
But Ms Truss insisted she is “unapologetic” in “focusing relentlessly on economic growth”, even as the £45 billion tax-slashing package sent the pound tumbling to fresh 37-year lows and sparked a backlash among some of her own MPs.
Using more than £70 billion of increased borrowing, Mr Kwarteng on Friday unveiled the biggest programme of tax cuts for 50 years, including abolishing the top rate of income tax for the highest earners.
The Resolution Foundation said Mr Kwarteng’s package will do nothing to stop more than two million people falling below the poverty line.
Analysis of the mini-budget by the think tank said “only the very richest households in Britain” will see their incomes grow as a result of the tax cuts.
The wealthiest 5% will see their incomes grow by 2% next year (2023/24), while the other 95% of the population will get poorer as the cost-of-living crisis continues.
The Institute of Fiscal Studies (IFS) said only those with incomes of over £155,000 will be net beneficiaries of tax policies announced by the Conservatives over the current Parliament, with the “vast majority of income tax payers paying more tax”.
IFS director Paul Johnson told BBC Breakfast on Saturday: “If you’ve got less than about £150,000 a year coming in, if you’re part of the 99% with less than £150,000 coming in, then you’re still going to be worse off as a result of tax changes coming in over the next two or three years.”
Worth repeating. Take all the tax changes coming in over next few years and:
If your income is < £155k, you lose
If your income is > £155k you win
If your income > £1m you gain more than £40,000 https://t.co/TkkGIKvNrl
— Paul Johnson (@PJTheEconomist) September 23, 2022
But Ms Truss defended her high-risk strategy designed to revive the UK’s stagnant economy.
In an op-ed for The Mail on Sunday, trailed in The Mail +, the Prime Minister wrote: “Growth means families have more money in their pockets, more people can work in highly paid jobs and more businesses can invest in their future. It provides more money to fund our public services, like schools, the NHS and the police.
“We will be unapologetic in this pursuit… everything we do will be tested against whether it helps our economy to grow or holds it back.”
Repeating her pledge to do things differently from previous Conservative administrations, she said: “We will usher in a decade of dynamism by focusing relentlessly on economic growth.”
Ms Truss also brushed off suggestions the measures could be fiscally irresponsible.
In an interview with CNN to be aired on Sunday but previewed in advance, she was asked about the responsibility of her economic plan.
“I don’t really accept the… premise of the question at all,” she told the US broadcaster.
“The UK has one of the lowest levels of debt in the G7, but we have one of the highest levels of taxes. Currently, we have a 70-year high in our tax rates.”
On Sunday, ONLY on @CNNSotu, we sit down inside @10DowningStreet with the brand new UK Prime Minister @trussliz — on the “special relationship” with the US, her controversial budget proposal, Ukraine, Taiwan, Macron, N. Ireland and much more! Tune in 9 am and noon Eastern pic.twitter.com/FopmarQzX2
— Jake Tapper (@jaketapper) September 23, 2022
Mr Kwarteng said he looks forward to “proving the naysayers wrong” over his “mission to encourage investment and drive growth”.
“I want to reassure you that with our growth plan everyone wins. This is a plan that cuts taxes for all, not just the wealthy,” the Chancellor wrote in The Sun.
“With this intervention, we will turbocharge the economy, creating more businesses, jobs and raised living standards which will directly benefit every single person.”
Earlier, the Chief Secretary to the Treasury said the Government is not concerned about the “politics of envy” as he insisted slashing taxes for high and low earners will drive growth.
Chris Philp told Times Radio: “We’re going to do what’s right. We’re going to get growth delivered. And we’re not going to sort of worry about the politics of envy, or the optics of it.”
He also said Mr Kwarteng’s tax-slashing programme is “not a gamble, it’s a necessity”.
Tory casino economics is gambling the mortgages and finances of every family in the country.
Labour will secure growth for working people, that benefits all communities.
My Government will deliver a fairer, greener future.
— Keir Starmer (@Keir_Starmer) September 24, 2022
Labour leader Sir Keir Starmer, who will seek to capitalise on the unpopularity of the Government’s mini-budget at his party’s annual conference, tweeted: “Tory casino economics is gambling the mortgages and finances of every family in the country.”
His deputy Angela Rayner told BBC Breakfast: “We’ve seen trickle-down economics before. It doesn’t work. We don’t believe it’ll stimulate the economy. And, you know, I think it will make the next generation worse off.
The Resolution Foundation said Mr Kwarteng’s measures will involve an extra £411 billion of borrowing over the next five years, while the IFS said he is “betting the house” by putting Government debt on an “unsustainable rising path”.
The IFS’s Mr Johnson said: “The scale of these tax cuts, along with the slowing of the economy, means that unless something remarkable happens, we’re going to be on an unsustainable path in terms of borrowing and, at some point, we’re likely to have to have tax rises to offset some of these cuts, or some cuts in spending.”
As part of tax cuts costing up to £45 billion annually, Mr Kwarteng also slashed stamp duty for homebuyers and brought forward a cut to the basic rate of income tax, to 19p in the pound, a year early, to April.
He confirmed plans to axe the cap on bankers’ bonuses, added restrictions to the welfare system, reversed the rise in national insurance and scrapped a planned rise in corporation tax.
Tony Danker, the director-general of the Confederation of British Industry, said the measures will not “suddenly unlock growth”.
He told BBC Radio 4’s Today programme: “There was nothing about skills. We need a broad-based plan for growth.
“If they (ministers) are hoping that simply reversing the six-point corporation tax rise will suddenly unlock growth when actually firms still pay 19%, it’s not going to do all the work”.