Chancellor Kwasi Kwarteng: ‘We must stay the course. I am confident our plan is the right one.’

The Chancellor of the Exchequer, Kwasi Kwarteng, will tomorrow (3 October) address the Conservative Party conference in Birmingham, where he is expected to launch a clear defence of the Government’s plans to boost economic growth.

In a period of high inflation and low economic growth, The Growth Plan releases the huge potential in the British economy by tackling high energy costs, cutting taxes to help people keep more of their own money and economic reform to drive productivity and higher wages.

Putin’s illegal invasion of Ukraine and weaponisation of Russian energy supplies has further increased gas prices, putting upward pressure on inflation and interest rates, raising the cost of government borrowing. High inflation is weighing on consumption and investment, slowing growth.

The Government has taken immediate action in response to these challenges. In the short term, our Energy Price Guarantee and Energy Bill Relief Scheme will support households and businesses through the current period of high energy prices. In the medium term, a comprehensive package of supply-side reforms and tax cuts will contribute to the government’s primary economic objective to boost trend growth to 2.5%.

The Growth Plan sets out action to unlock private investment across the whole of the UK, cut red tape to make it quicker to deliver the UK’s critical infrastructure, make work pay, and support people to get onto the property ladder. New Investment Zones will provide generous tax reliefs, and planning liberalisation to support employment, investment, and home ownership.

The Government is committed to fiscal sustainability and reducing debt as a proportion of Gross Domestic Product (GDP) over the medium-term, and will set more of our approach in the Medium Term Fiscal Plan on 23 November. The Government will take the responsible decisions that are needed to achieve this aim, including keeping spending under control.

Taken together, reforming the supply side of the economy, cutting and simplifying tax, and maintaining fiscal discipline will drive efficiency, will enhance UK competitiveness, and help to boost growth and sustainable public finances in the long term.

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Chancellor Kwasi Kwarteng is expected to say:

“We must face up to the facts that for too long our economy has not grown enough.

“The path ahead of us was one of slow, managed decline.

“And I refuse to accept that it is somehow Britain’s destiny to fall into middle income status…

“Or that the tax burden reaching a 70-year-high is somehow inevitable. 

“It isn’t, and shouldn’t be.

“We needed a new approach, focused on raising economic growth. 

“That is the only real way to deliver higher wages, more jobs, and crucially, revenue to fund our precious public services…

“…and it is the only way to achieve long-term fiscal sustainability.

“We must stay the course. I am confident our plan is the right one.”

Commenting on the state of the British economy, the Chancellor will also say:

“With energy bills skyrocketing. A 70 year high tax burden. Slowing long-term growth rates. Painfully slow infrastructure delivery.

“Should we really have just accepted that fate?

“Think about the cost to livelihoods and the impact on our communities. 

“What Britain needs is economic growth. And a government wholly committed to economic growth.

“That is why we will forge a new economic deal for Britain…

“…backed by an iron-clad commitment to fiscal discipline.

“More businesses. More jobs. Higher pay. More money for public services. 

“Because you cannot have a strong NHS without a strong economy. 

“You cannot have good schools without a strong economy. 

“You cannot have quality infrastructure without a strong economy. 

“With this plan, we are aiming for 2.5% annual trend growth.

“We did it before. We can do it again. 

“And even in the face of extreme volatility in global markets….

“….with major currencies wrestling an incredibly strong US dollar…

“….and longer term trends from demographic change to climate change…

“…we will show that our plan is sound, credible and will increase growth.

“That is my promise to the people of this country.”

ENDS

For further information, please contact Cameron Brown on 07543 661160.

Notes to Editors

The Government needed to act urgently

•                This Government’s overarching priority is economic growth. That is the way that we invest in the services that ordinary people need, create high quality jobs, and that we give people the safety, security, and the stability to live their lives how they want.

•                Without action, Britain would be in decline. For the two decades prior to the pandemic growth averaged 1.8 per cent. Without higher growth we are on a path to national decline, higher taxes, a worse NHS, and unaffordable services (HMT, Growth Plan, p.9, link).

•                The cost of not acting would have been higher. Businesses would have closed, and families would have been unable to heat their homes. The UK was facing Covid-style coordinated closures and drastic cutbacks in consumer spending – we needed to act quickly.

The Growth Plan will put the UK on a path to higher growth

•                We have a detailed plan of action to get Britain moving again. We are improving the fundamentals of the economy. We will get every part of the Government focused on growth, removing the barriers that have slowed down the UK economy for years.

•                We will solve the issues holding back ordinary people. We will accelerate building roads and rail, tackle the issues with affordability of childcare and housing, solve our energy crisis, and get more people to work with the right skills (HMT, Growth Plan, p.15-34, link).

•                Growth will benefit the whole country. Investment Zones will drive growth and unlock housing, allowing every part of the UK to flourish by offering lower taxes, liberalised planning, and wider economic support (BEIS, Investment Zones Factsheet, link).

•                These are exactly the reforms that central banks have been requesting. The WSJ has noted that ‘Every other central banker in the developed world would love to be in Mr Bailey’s shoes right now . . . they have tightened monetary policy to combat inflation, they all beg their political counterparts to enact supply-side pro-growth policies to ease the recessionary impact of tighter money’ (Wall Street Journal, 23 September 2022, link).

•                The Growth Plan will shorten the recession and deliver sustainable long-term growth. Independent forecasts suggest that ‘the energy support guarantee, together with the tax cuts announced today, will lead to positive GDP growth in the fourth quarter of this year, shortening the recession and raising annual GDP growth’ (NIESR, 23 September 2022, link).

This Government is committed to responsible economic management

•                We take a responsible and realistic approach to managing public finances. The one-off intervention in the energy market is the largest single component of the package. We are committed to reducing debt as a proportion of GDP and will set out a path to achieve this in the medium-term fiscal plan on 23 November. We are sticking to existing spending settlements from this review and will maintain a disciplined approach to public finances (HMT, Update on Growth Plan Implementation, link).

•                We will take responsible decisions on revenue generation. Faster economic growth will help grow the tax base – even a one per cent change to growth rates would increase revenue by £47 billion over five years, and the Growth Plan included major revenue raisers such as maintaining the Energy Profits Levy and the Bank CT surcharge (HMT, Growth Plan, p.9 & p. 26, link).

•                The fundamentals of the UK economy are sound. We have the second lowest debt-to-GDP ratio in the G7. Even with the actions from the Growth Plan public sector debt is currently forecasted to rise to 91.6 per cent of GDP in 2024-25, rather than fall to 87.5 per cent of GDP. Meaning it will remain lower than Canada, France, Italy, Japan and the United States (NIESR, 23 September 2022, link; IMF, Fiscal Monitor Database, Table A7, link).

•                The UK is not the only country seeing disruption. The Japanese Central Bank recently had to intervene to stabilise the Yen, and all other major currencies have fallen compared to the dollar (Bloomberg, 23 September 2022, link).

Worked examples of family benefits from the Growth Plan

•           Over 30 million people will see tax cuts as a result of our changes to income tax and National Insurance. For example, someone earning £30,000 will pay £400 less tax next year. This is on top of cuts to Stamp Duty for those looking to buy a house or get on the property ladder.

•           Due to the Energy Price Guarantee a typical household will save around £1,000 and a business will pay less than half the wholesale prices anticipated this winter.

•           A typical person living in a flat will save £800 on the household's energy bills – and if they are working full time on the National Living Wage, over an additional £100 on tax. This is around £900 in total.

•           A typical person in a semi-detached property will save £1,150 on the household's energy bills – and if they are earning £30,000 almost an additional £400 on tax. This is around £1,550 in total.

•           A typical family moving into a semi-detached property will save £2,500 on Stamp Duty and £1,150 on energy bills – and if they have a combined income of £50,000 around an additional £560 on tax. This is around £4,200 in total.

•           A typical family moving into a semi-detached property will save £2,500 on Stamp Duty and £1,150 on energy bills –and if one worker earns £50,000, almost an additional £850 on tax. This is around £4,500 in total.