UK’s Kwarteng Hints at More Tax Cuts as Starmer Says He Would Reintroduce Top Rate Income Tax

New British Chancellor of the Exchequer Kwasi Kwarteng walks outside Number 10 Downing Street, in London on Sept. 6, 2022. (Toby Melville/Reuters)

Chancellor of the Exchequer Kwasi Kwarteng said on Sunday that more tax cuts are on the way.

It comes after his tax-slashing mini-budget announcement on Friday was met with mixed reactions.

In the biggest tax cuts in 50 years, the Chancellor brought forward a planned cut to the basic rate of income tax from 20 pence in the pound to 19 pence a year early to April 2023 and reduced stamp duty for homebuyers.

He also canceled a planned hike in corporation tax and abolished the top rate of income tax (45 pence in the pound) for the highest earners—a five percent cut for earnings in excess of £150,000—effective from April next year as well.

Speaking to the BBC on Sunday, Kwarteng denied the accusation that his tax cut favours the rich and hinted at more cuts next year.

“We’ve actually put more money into people’s pockets,” Kwarteng said. “We’re bringing forward the cut in the basic rate and there’s more to come.

“I want to see over the next year, people retain more of their income, because I believe it’s the British people that are going to drive this economy,” he added.

Meanwhile, Labour leader Sir Keir Starmer said he would reverse the decision to abolish the top rate of income tax if he was in office, saying it’s “hugely risky” and “hugely divisive.”

“I do not think that the choice to have tax cuts for those that are earning hundreds of thousands of pounds is the right choice when our economy is struggling the way it is, working people are struggling in the way they are, and our public services … so is the wrong choice.”

He didn’t comment on whether he would increase the rate to higher than 45 percent when asked but said he does support the 1 p cut in the basic income tax rate.

Kwarteng’s mini-budget came with a huge price tag as he said the recently announced plan to subsidise energy bills for households and businesses was expected to cost £60 billion in the next six months.

The idea is to fund the package and other spending with £72 billion of increasing borrowing while creating more future revenue by unleashing economic growth.

The new chancellor’s announcement came one day after the Bank of England increased the cost of borrowing by a further 0.5 percent, but he gave no detail regarding how to reduce the UK’s debt as a percentage of GDP, saying the plan would be published in a medium-term fiscal plan “in due course.”

Business leaders welcomed Kwarteng’s mini-budget, but it’s seen by critics as a huge gamble.

Following the announcement, investors dumped short-dated British government bonds as fast as they could, while the pound slumped more than 3 percent against the dollar to levels last seen 37 years ago.

Asked whether he was nervous about the diving pound, falling stock markets, and rising cost of government borrowing, Kwarteng said the UK has to have a “much more front-footed approach to growth.”

“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 percent about,” he said.

He refused to comment on market movements.

“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,” he said.

PA media and Reuters contributed to this report.