Kwasi Kwarteng grilled by Kuenssberg over tax cuts
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Kwasi Kwarteng is due to meet bankers today amid the fallout from his mini-budget. The Chancellor will reportedly ask financiers not to bet against the slumping pound.
Mr Kwarteng is also expected to highlight his commitment to fiscal discipline and the importance of his “Big Bang 2.0” measures as part of his plan to boost growth.
The Government has denied he will be asking bankers not to short the pound, Sky News reports.
Representatives from Bank of America, JP Morgan, Standard Chartered, Citi, UBS, Morgan Stanley and Bloomberg will all attend the meeting with Mr Kwarteng on Wednesday.
It comes after the Chancellor’s mini-budget last Friday spooked the markets with its £45 billion package of tax cuts, including the abolition of the 45p rate of income tax for people on more than £150,000, funded by Government borrowing.
There have been days of chaos which have seen the pound plunge to record lows against the dollar, while Government borrowing costs have jumped.
In an extraordinary statement last night, the International Monetary Fund (IMF) criticised the Government’s strategy.
It said it was “closely monitoring” developments in the UK and was in touch with the authorities.
The IMF also urged the Chancellor to “re-evaluate the tax measures”.
It said in the statement: “We understand that the sizeable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.
“However, given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross-purposes to monetary policy.
“Furthermore, the nature of the UK measures will likely increase inequality.”
The IMF called on Mr Kwarteng to change course when he comes back to Parliament in November.
It said: “The November 23 budget will present an early opportunity for the UK Government to consider ways to provide support that is more targeted and re-evaluate the tax measures, especially those that benefit high-income earners.”
In response, a Treasury spokeswoman said: “We have acted at speed to protect households and businesses through this winter and the next, following the unprecedented energy price rise caused by (Vladimir) Putin’s illegal actions in Ukraine.”
The intervention by the IMF came as the Bank of England signalled it was ready to ramp up interest rates to shore up the pound and guard against increased inflation, which has sparked fears of surging mortgage costs.
The pound suffered further falls on Wednesday morning, dropping back to 1.06 US dollars after reaching 1.08 US dollars on Tuesday.
However, backbench allies of Prime Minister Liz Truss have insisted she should stick to her plan.
Tory MP Sir John Redwood told Sky News this morning: “My message today is that the Government are right to see the main threat for the year ahead is recession, not inflation.”
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