Kwasi Kwarteng claims his tax cuts “favour people right across the income scale” and hinted more are on the way after delivering his mini-budget on Friday.
The Chancellor unveiled the biggest programme of tax cuts for 50 years, using more than £70 billion of increased borrowing, and has been forced to defend the measures after accusations they mainly help the rich.
Analysis suggests the measures, which include abolishing the top rate of income tax for the highest earners, will only see the incomes of the wealthiest households grow while most people will be worse off.
However, Mr Kwarteng has insisted he is “focused on tax cuts across the board”. When it was put to him that his measures “favour overwhelmingly people at the very top”, he told the BBC’s Sunday With Laura Kuenssberg programme: “They favour people right across the income scale.”
The Chancellor also cut 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, as part of tax cuts costing up to £45 billion annually.
Three days after his fiscal statement, Mr Kwarteng indicated his announcements were just the beginning of the government’s agenda designed to revive the UK’s stagnant economy.
He said: “We’ve only been here 19 days. I want to see, over the next year, people retain more of their income because I believe that it’s the British people that are going to drive this economy.”
What other tax cuts could be announced?
Mr Kwarteng and Prime Minister Liz Truss could continue their spree in the New Year with possible further reductions in income tax and the loosening of immigration rules and other regulations.
The Chancellor, who has launched a review of all tax rates ahead of a formal Budget, is reportedly considering abolishing a charge for parents who earn more than £50,000 and claim child benefit, increasing the annual allowances on pension pots and a tax break for people who stay at home to care for children or loved ones.
It comes after Mr Kwarteng’s £45 billion tax-slashing package saw the pound tumble to fresh 37-year lows, with the slide continuing as trading opened in Asia and Australia on Monday, fuelling predictions that sterling could plunge to parity with the US dollar by the end of the year.
Asked whether he was nervous about the diving pound, falling stock markets and rising cost of government borrowing, Mr Kwarteng said: “We’ve got to have a much more front-footed approach to growth and that’s what my Friday statement was all about.
“I think that if we can get some of the reforms … if we get business back on its feet, we can get this country moving and we can grow our economy, and that’s what my focus is 100% about”.
He refused to comment on market movements, adding: “I’ve been focused on the longer term and the medium term, and I think it was absolutely necessary that we had a long-term growth plan.”
The Chancellor was also asked whether there is a limit on borrowing, after the IFS think tank said he is “betting the house” by putting government debt on an “unsustainable rising path”.
He replied: “Obviously you can’t borrow forever. If there is an exogenous extreme event, I can’t possibly say that we won’t borrow to deal with that”.
In a sign of Tory unease, Conservative former chancellor George Osborne urged the government to end the “schizophrenic” policy of slashing taxes and increasing borrowing, while opposition parties said the plans were an admission of 12 years of Tory economic failure.
Labour leader Sir Keir Starmer hit out at the government’s “wrongheaded” economic policies and pledged to reverse the income tax cut for people earning more than £150,000.
However, Ms Truss defended the measures announced on Friday and said her government was “incentivising businesses to invest and we’re also helping ordinary people with their taxes”.