Tory U-Turn On Tax Cuts Is Causing Chaos – So Who Is Blaming Who?
The government is scrambling around to find a scapegoat after it scrapped its plan to cut the 45p tax rate for top earners in an embarrassing U-turn on Monday.
The chancellor Kwasi Kwarteng claimed the tax rate had become a “distraction” from the overall Growth Plan, and suggested it was a sign of “humility and contrition” that the government was willing to change its mind over this.
However, that sidesteps the fact that the policy was one of several Kwarteng unveiled 10 days ago which caused the market to crash, and the pound to drop to its lowest ever level against the US dollar, at $1.03.
It also comes after a rebellion among the Tory backbenchers started up, with MPs claiming Downing Street was “disconnected from reality”.
With such a cloud hanging over this government’s first month in power, it seems no one is wasting any time in playing the blame game about who originally came up with the idea to cut the rate paid by the UK’s highest earners.
Kwasi Kwarteng blamed by the PM
Hours before the U-turn, Truss blamed her own chancellor for axing the 45p income tax rate paid by anyone earning more than £150,000.
Asked on Sunday by the BBC if the whole cabinet had been consulted before that decision was taken, she said: “No, no we didn’t. It was a decision that the chancellor made.”
Former culture secretary and prominent ally to the PM, Nadine Dorries, then tweeted saying Truss had thrown her own chancellor “under the bus”.
Liz Truss blamed (a little) by the chancellor
Kwarteng disputed that Truss was blaming him for coming up with the policy in the first time during her Sunday interviews.
The chancellor told BBC Breakfast: “The prime minister decided not to proceed with the abolition of the rate.”
Questioned over whether it was actually Truss’ decision to U-turn on the policy, Kwarteng said: “No, we talked together, I said this is what I was minded to do and we decided together. We were in agreement that we wouldn’t proceed with the abolition of the rate.”
Chris Philp blamed by Tory insiders
Treasury chief secretary Chris Philp has been under fire for supposedly pitching the idea in the first place, according to The Guardian’s Pippa Crerar, although she clarified that she was told about this before the U-turn on Monday.
Truss and Kwarteng blamed by Chris Philp
Pressed by Sky News’ Kay Burley on Monday about whether this policy had come from him, Philp repeatedly said it was a group decision.
He claimed: “I did not produce a paper specifically on this measure, it was mentioned within lots of different ideas.”
Kay Burley pushed: “It was your idea, wasn’t it?”
“I wouldn’t describe it as my idea, no,” Philp insisted. “The whole growth plan was debated and ultimately decided by the chancellor and the prime minister.”
Economic adviser blamed by the chancellor
Kwarteng also told BBC Radio 4′s Today programme that he could not “remember” being warned by Truss’ economic adviser that his unfunded tax cuts would cause trouble in the financial markets.
It’s also worth noting that the “mini” budget was unveiled without any assessments about the state of the UK economy from the Office for Budget Responsibility, as is conventional for announcement of this size.
The OBR later said it would have been able to provide a brief summary even though Kwarteng’s budget was going to be announced short notice – but, the organisation said the chancellor never requested one for its £45 billion tax cut plan.
Chris Philp (and Kwarteng) blamed by economic adviser
Gerard Lyons, chief economic strategist at Netwealth, is an external adviser to Truss.
He told PA Media that Kwarteng was “incorrect”, and that Lyons had been “very clear” about warning the chancellor about the consequences of his mini-budget.
Lyon added: “I have no view on the U-turn. I was critical of that immediately after the mini-statement and said so publicly on the record, but it’s up to them what they do in terms of U-turns.”
Kwarteng (sort of) blamed Kwarteng
The chancellor stopped short of apologising for the chaos on Monday, and refused to say that the chaos on the markets was down to any parts of his “mini” budget.
But, Kwarteng told LBC that the U-turn on 45p came after “I decided, along with the prime minister, that the best thing to do was simply not proceed with the abolition of the rate”.
He added: “I was responsible for the budget, I take full responsibility for that, I was looking around the world and looking at competitive tax rates. But I think governments have to listen,” he said.
He also said to BBC Radio 4′s Today: “There is humility and contrition…and I’m happy to own it.”