Kwarteng told the House of Commons on Tuesday they set out the growth plan which will get the country out of “the high tax, low growth cycle we are currently trapped in” after 12 years of Conservative government. He said this will put more money in people’s pockets and raise living standards.
But the chancellor is yet to confirm how those cuts will be funded. The Institute for Fiscal Studies has warned “painful” spending cuts of around £60billion a year will be needed by 2026/2027 if the government is going to meet its targets for economic growth.
The chancellor also once again refused to confirm whether benefits would be increased in line with inflation, saying “no decisions have been made”. Chris Philp, the chief secretary to the treasury, added he was “not going to offer any running commentary on internal discussions” around benefits.
A U-turn on Rishi Sunak’s promise to increase benefits next year would be a “devastating blow” to low-income households struggling with the cost of living crisis, charities have warned. James Taylor, at disability charity Scope, said increasing universal credit in line with wages rather than inflation — a real-terms cut — would lead to disabled people starving and freezing in their own homes.
Instead, Kwarteng reiterated the freeze to the energy price cap, which meant the average household bill rose to £2,500 rather than £3,500 in October. He said there is a “huge amount of intervention this government is committing to”, adding that his “priority is making sure everyone can get through these challenging times as best they can”.
Even with the energy price cap, the average household will still pay more than double what they were paying earlier this year.
It comes as the Bank of England warned of a “material risk” to financial stability, taking emergency action for the third time since Kwarteng’s mini-budget announcement in an attempt to calm investors.
Last week, the chancellor U-turned on plans to cut the top rate of income tax. The policy had been branded for the “richest one per cent while the poorest were forced to pay the price”.
Dame Angela Eagle, the MP for Wallasey, criticised the chancellor for the “chaos of the mini-budget with its £45 billion of unfunded spending commitments and taxes”.
And the Shadow Chancellor Rachel Reeves said it is a “British crisis made in Downing Street”.
“No other country is sabotaging their own country’s economic credibility as this country is,” she added.
Tory ministers, including the chancellor, hit back at critics and joked that they had firmly booked themselves a place on the so-called “anti-growth coalition”.
The chancellor confirmed he will fast-track his medium-term plan to October 31 following mounting pressure from MPs. It will be published alongside fresh forecasts for the economy from the Office for Budget Responsibility.