A summary of today's developments
Kwasi Kwarteng, the chancellor, said the government has abandoned the plan in the mini-budget to abolish the 45% top rate of income tax. He claimed the proposal has become a “distraction from our overriding mission to tackle the challenges facing our country”. Rachel Reeves, the shadow chancellor, says the U-turn has come too late, because the mini-budget is already leading to higher mortgages for families.
In another reversal, the Guardian understands Kwasi Kwarteng will speed up plans for a new fiscal statement, expected to be focussed on spending and deregulation. It will now take place later this month, rather than November 23, accompanied by new forecasts from the Office of Budget Responsibility, in another move designed to restore market stability.
Jacob Rees-Mogg has announced the UK’s first prototype nuclear fusion power station will be built in Nottinghamshire by 2040.
The government “will be replacing GDPR (general data protection regulation) with our own business and consumer friendly British data protection system,” culture secretary Michelle Donelan announced.
Jacob Rees-Mogg has declared “if people want to call me Tory scum, I don’t mind”. He told the Tory conference: I wanted to thank you for giving me almost a warmer welcome as I got outside the hall. “But I think that’s rather marvelous, I happen to think that having a democracy where you can actually walk through the streets and people can exercise their right to peaceful protest shows the strength of our society. “And if people really want to call me Tory scum, I don’t mind.”
The Conservative party conference centre was locked down for about an hour and a half due to a security scare. Police locked all entrances and exits at about 3.30pm with ministers among those forced to wait outside. The lockdown caused widespread disruption to events inside and outside the conference venue, which is being held at Birmingham’s International Convention Centre. The type of the security scare is unknown.
Liz Truss packed her cabinet with “cronies off the backbenches” rather than competent ministers with a range of views, and appeared to have no coherent plan behind her mini-budget, Michael Heseltine said.
Schools minister Jonathan Gullis has told a fringe meeting at the Conservative party conference he is hoping that legislation to lift the current ban on new grammar schools in England will be brought forward before the next election. Gullis, a former teacher who has campaigned to scrap the ban and allow more grammar schools in England, told an Education Policy Institute event there was no date set and he didn’t know if it would be in this parliamentary session.
Downing Street said Liz Truss still has confidence in the chancellor, Kwasi Kwarteng. At the lobby briefing in London, asked if Truss has confidence in her chancellor, the prime minister’s spokesperson told reporters: “Yes.”
Senior Conservative officials have accused West Midlands police of failing to do enough to keep protesters away from delegates at the party conference, a leaked letter reveals.
The disclosure comes just hours after the police were forced to lock down the conference in central Birmingham for several hours after a security scare. Police say they have been shortchanged by over £500,000 on the costs of keeping the conference in Birmingham secure.
Jake Berry, the Conservative party chair, and Darren Mott, party chief executive, sent a letter on Sunday evening to the police and crime commissioner for the West Midlands raising “serious concerns” over security around the conference.
A new poll shows Labour leads by 28% over the Conservatives.
Kwarteng 'to bring forward planned 23 November fiscal statement'
In another reversal, the Guardian understands Kwasi Kwarteng will speed up plans for a new fiscal statement, expected to be focussed on spending and deregulation.
It will now take place later this month, rather than 23 November, accompanied by new forecasts from the Office of Budget Responsibility, in another move designed to restore market stability.
A Conservative Treasury minister and one of Liz Truss’s major campaign donors said they would like to abolish inheritance tax, as they urged her to continue with her “politically brave” agenda for wealth creation.
Andrew Griffith, a City minister under Kwasi Kwarteng, said tax was not his policy area but inheritance tax would be his top choice for a tax to abolish.
Michael Spencer, a Tory peer and City financier who gave £25,0000 to Truss’s leadership campaign, also backed abolishing inheritance tax, saying it was causing wealthy people to move abroad as non-doms, and scrapping tax on share trading.
Here is a montage of Liz Truss and Kwasi Kwarteng’s comments before the income tax U-turn.
Kemi Badenoch urged her colleagues to have dissent “in a grown-up fashion”, instead of rushing to the first TV studio when they have an issue with government policy.
The International trade secretary took part in a question and answer session with GB News’ Liam Halligan on the main stage of the Conservative Party conference in Birmingham, where she spoke about the recent blue-on-blue attacks.
Asked how the party can communicate effectively the growth plan to the country, Ms Badenoch spoke about the need for “unity” and to “get behind the Prime Minister”.
She said that if people have problems with government policy, there is a way of communicating dissent that does not involve “rushing to the first TV studio to let everybody know how angry you are”.
Chancellor Kwasi Kwarteng decried the “hullabaloo” about his mini-budget as he noted the “market reactions and the excitement” that led to his U-turn on axing the top rate of income tax.
He acknowledged the “extraordinary events” of the last 10 days and recent months in a brief speech at a PolicyExchange drinks reception at the Tory party conference.
“Beyond the market reactions and the excitement, there’s a real strong body of ideas there which are all about growth,” he said.
Kwarteng added despite the “hullabaloo about my statement”, business people had praised his plan for growth.
Here is Jacob Rees-Mogg’s remarks that he would be ‘delighted’ for his back garden to be fracked, as he risked deepening divisions within the Conservative party by deriding those who oppose the controversial practice as ‘socialists’.
Nick Timothy, who was chief of staff to Theresa May, believes it will be “very, very difficult” for Liz Truss to recover from the position she’s in.
He believes the PM and Kwasi Kwarteng have “dug themselves in an absolutely enormous hole”.
Timothy told LBC’s Tonight with Andrew Marr: “I think it’s very, very difficult to recover from the position she’s in.
“I think anybody who makes the assumption that therefore she might be removed or have to leave as PM, I think is over-egging it at this stage.
“But they’ve dug themselves in an absolutely enormous hole and it’s going to be very difficult to get out of it.”
Truss added she wants a settlement with the EU over the Northern Ireland Protocol which “works for everybody”.
She said she can see no reason why an Assembly and Executive cannot be re-established now at Stormont.
Asked if an election would be called if the Stormont powersharing institutions are not restored by October 28, Truss replied: “Yes, there will.”
Liz Truss said Northern Ireland Minister Steve Baker was speaking for himself when he apologised for his previous “ferocious” stance on negotiations with the EU.
In an interview with UTV, the prime minister said: “Steve speaks for himself.
“I think we have a very good relationship with the Republic of Ireland. I have had a very good meeting with the Taoiseach (Micheal Martin) talking about the future.
“I want to work constructively with the Republic of Ireland and the EU as well as all the parties in Northern Ireland.
“Steve speaks from his own personal experience being deeply involved in the Brexit debate, but he speaks for the whole Government in that we absolutely want to find a negotiated solution to deal with the issues of the Northern Ireland Protocol and work with our neighbours in the Republic of Ireland.”
The author of a controversial government report which claimed that Britain was no longer a place “where the system is deliberately rigged against ethnic minorities” has told an event at the Tory Party conference that ‘the left’ has to take responsibility for what he described as “the weaponisation” of race.
Dr Tony Sewell, who was the chair of the government’s commission on race and ethnic disparities, told the fringe event that the body’s report had been misrepresented by people who had not read it and who, he claimed, had claimed him “a race denier.”
“What I am trying to say is that the weaponisation of this today is based on a simplification,” he said, adding that “white guilt” was also part of this.
The result of laws and the atmosphere created by this, Sewell claimed, was that black people ended up being feeling restricted and believed that there needed to be ‘safe spaces’. He gave the example of walking clubs in which people from ethnic minorities came together.
“Slowly the weaponisation comes in to restrict you and I do think that some people on the left have to take responsibility for this,” he added.
When it was published in 2021, academics pulled apart claims in Sewell’s report that teaching about Britain’s colonial past should include material that “speaks to the slave period not only being about profit and suffering, but how culturally African people transformed themselves into a remodelled African/Britain”.
Among other critics, Doreen Lawrence, who campaigned for justice for 18 years after the murder of her son Stephen by racists, warned that the report risked pushing the fight against racism “back 20 years or more” for undermining the existence of structural racism.
Work and pensions secretary Chloe Smith has said “protecting the most vulnerable is a priority for me”.
Speaking from the main stage of the Conservative Party conference, she noted the government has confirmed that pensions “will again be supported by the triple lock”.
She went on: “I can say today that as a part of continuing what we’ve done with our broader cost-of-living payments, to help the pensioners, to help the disabled people, to help those on the lowest incomes, we are making the next payments in the month of November and I know that will be welcome news to many.”
UK's first prototype nuclear fusion power station to be built by 2040
Jacob Rees-Mogg has announced the UK’s first prototype nuclear fusion power station will be built in Nottinghamshire by 2040.
He told the Conservative Party conference: “Over the decades we have established ourselves as pioneers in fusion science and as a country our capabilities to surmount these obstacles is unparalleled, and I am delighted to make an announcement of a vital step in that mission.
“We will build the UK’s first prototype fusion energy plant in Nottinghamshire, replacing the West Burton coal-fired power station with a beacon of bountiful green energy.”
Rees-Mogg added: “The plant will be the first of its kind, built by 2040 and capable of putting energy on the grid, and in doing so will prove the commercial viability of fusion energy to the world.”
Iran’s most senior diplomat in the UK was summoned to the Foreign Office on Monday, over the country’s crackdown on the wave of protests.
Thousands of Iranians have taken to the streets in protest at the death of 22-year-old Mahsa Amini, who had been detained by police in the capital Tehran for allegedly not adhering to Iran’s Islamic dress code.
The foreign secretary said he had instructed the Foreign Office to summon Mehdi Hosseini Matin.
James Cleverly said: “The violence levelled at protesters in Iran by the security forces is truly shocking.
“Today we have made our view clear to the Iranian authorities - instead of blaming external actors for the unrest, they should take responsibility for their actions and listen to the concerns of their people.
“We will continue to work with our partners to hold the Iranian authorities to account for their flagrant human rights violations.”
Government announces it will replace GDPR rules
The government “will be replacing GDPR (general data protection regulation) with our own business and consumer friendly British data protection system,” culture secretary Michelle Donelan announced.
Making her speech at the ICC in Birmingham, she said the “bureaucratic nature” of EU GDPR “is still limiting the potential of our businesses”.
She added: “That is why today, conference, I am announcing that we will be replacing GDPR with our own business and consumer friendly British data protection system.”
Rees-Mogg, whose residence is the 17th-century Gournay Court in the parish of West Harptree, Somerset, earlier welcomed fracking on his land.
“Yes, of course I would. I would be delighted, particularly if I get these royalties,” he said.
“If we do what I’m suggesting on shale gas you would be doing a public service by doing it in your back garden but you’d also get paid for it.”
Rees-Mogg has claimed “the Prime Minister since she took office has completed about a year’s Government business in a fortnight”.
The business secretary added: “I am glad to say, the Prime Minister, and I say this as minister for energy, is a genuine dynamo and is producing electric fields that are making sure things get done.
“She knows how urgent the challenges we face are. And the challenges are particularly in energy. First of all, affordability this winter, second, securing energy supplies. And third, what I’d like to call intelligent net zero. And how are we tackling those challenges? Well, rapidly is the answer.”
Rees-Mogg pointed to the energy price guarantee for households and the energy bill relief scheme for businesses, before adding: “There may be some people who think it’s not Conservative to intervene in this way.
“But I would say that there was no question that we had to come to the British people’s aid.”
Jacob Rees-Mogg said Boris Johnson’s plans for a new royal yacht are not in the “realms of reality” as he suggested it should be scrapped.
The business secretary described it as a “ship that has sailed”, as he said the “glorious distraction” set to cost 250 million could not go ahead in a cost-of-living crisis.
When prime minister, Johnson had described a new national flagship as a chance for the UK to “show itself off to the world” and “revive the shipbuilding industry”.
Labour said the plan for a ship to succeed the Royal Yacht Britannia should be scrapped. The money had been set to come from the Ministry of Defence (MoD) budget.
Rees-Mogg told a recording of the Chopper’s Politics for the Telegraph: “I think it’s a glorious distraction I’m afraid.
“It’s too late, it was wonderful whilst it lasted but there are lots of things that Tories have a sentimental attachment to but once they’ve gone it’s impossible to bring back.
“I think the royal yacht is in that category and we are facing a cost-of-living problem, I just don’t think it’s in the realms of reality to have a royal yacht when you’re facing a cost-of-living problem.
“Dare I say I think it is a ship that has sailed.”
An MoD spokeswoman said: “The design phase for the national flagship is due to be completed soon and an announcement will be made in due course.”
Rees-Mogg: ‘if people want to call me Tory scum, I don’t mind’.
Jacob Rees-Mogg has declared “if people want to call me Tory scum, I don’t mind”.
Speaking at the Conservative Party conference in Birmingham, the business secretary said: “Well, ladies and gentlemen, thank you and congratulations for coming to the conference in spite of the best efforts of Mr Mick Lynch, who seemed to wish to get in the way.”
He added: “You make sure we have Conservative governments and you getting here was proof of that. Some of you may think that I should be going around the trains, putting out little calling cards saying how much I look forward to seeing people back at work soon.
“Because, actually, we have a tireless quest for productivity in this country and we need to make sure that everybody is working efficiently, and we want them obviously to be working in their proper places of work.
“Also I wanted to thank you for giving me almost a warmer welcome as I got outside the hall.
“But I think that’s rather marvelous, I happen to think that having a democracy where you can actually walk through the streets and people can exercise their right to peaceful protest shows the strength of our society.
“And if people really want to call me Tory scum, I don’t mind.”
Education minister Andrea Jenkyns has been mocked on social media after she told a fringe event at the Conservative party conference that the current education system would rather young people get a degree in “Harry Potter studies” than in construction.
Jenkyns, minister for skills, further and higher education, told her audience that students were being fed a diet of “critical race theory, anti-British history and sociological Marxism” in universities, and she promised a government clear out of low quality courses.
Jenkyns, who was memorably photographed sticking up her middle finger at protestors after Boris Johnson’s resignation speech, told the Bruges Group event: “A skilled modern economy competing on the global stage requires technical skills just as much as it needs graduates.
“Yet the current system would rather our young people get a degree in Harry Potter studies than the apprenticeships shaping construction. It doesn’t take magic powers to work out that this is wrong, which is why the government is committed to putting the broomstick to good use and carrying out a spring clean of low quality courses.”
Sam Freedman, former senior policy adviser at the Department for Education, responded on Twitter: “Number of students currently studying architecture, building, planning and engineering = 245,395. Number currently studying ‘Harry Potter Studies’ = 0.”
Badenoch urges Tories to unite behind Truss, and to express concerns in private, not through media
Kemi Badenoch, the new international trade secretary, got a tremendous round of applause when she arrived for her session on stage. Some surveys suggested that, if she had been on the final ballot, she would have won the Tory leadership. She was taking part in a Q&A, rather than delivering a speech, and she used it to appeal for unity. She also urged MPs with concerns about policy to express them in private, not through the media. She said:
As a party, we need to get behind the prime minister because if you don’t do that, then none of that ...
We need unity. And we need to be able to have dissent in a grown-up fashion. I think, when other people have problems with policy, I think there is a way of communicating it and not necessarily rushing to the first TV studio to let everybody know how angry you are.
Some of the people who have done this are my friends, but it is not helpful for the whole party. So, the party needs to come together. But we also need to remember who our real opponents are and that’s the Labour party.
That’s all from me for today. My colleague Nadeem Badshah is taking over now.
Ranil Jayawardena, the new environment secretary, used his speech to the party conference to say that, under Liz Truss, the Department for Environment, Food and Rural Affairs would stop being a “regulatory department” and become an economic growth department. He said:
I can assure you all today that my department should no longer be seen as one that follows the EU, imposes rules and impedes innovation.
Instead of being a regulatory department, we are now an economic growth department.
Food and drink is our largest manufacturing sector.
It is bigger than automotive and aerospace put together, with a presence in every constituency in this country.
The opportunity for growth in the sector is enormous – and it will bring jobs, skills and prosperity across the nation.
Michelle Donelan, the culture secretary, used her speech to the conference to confirm that the online safety bill – temporary shelved after Liz Truss became PM – will return to the Commons. She said:
Last week there was the inquest into Molly Russell. It further highlighted the horrific failure of social media companies in terms of their ability to put children and young people, and their welfare, first.
I think we owe it to Molly Russell and all of Molly’s family to ensure that we do everything in our power to stop this from happening again.
Our online safety bill must be the answer and I will make sure the bill’s key objective really is ensuring that social media companies protect children online.
I can confirm here today that the bill will be returning to parliament and my dedicated team of ministers and I are working flat out to ensure that the bill is delivered.
Rachel Reeves, the shadow chancellor, says Kwasi Kwarteng’s speech shows he is “completely out of touch”. In a statement she says:
This speech showed us a chancellor and a Tory government completely out of touch, with no understanding on its own appalling record on growth.
What the chancellor called a little financial disturbance is a huge economic body-blow to working people that will mean higher prices and soaring mortgages. That’s the Tory economic premium.
This is an economic crisis made in Downing Street, paid for by working people.
Lockdown at Tory conference lifted after security alert lasting around 90 minutes
The Conservative party conference centre was locked down for about an hour and a half due to a security scare.
Police locked all entrances and exits at about 3.30pm with ministers among those forced to wait outside. The lockdown caused widespread disruption to events inside and outside the conference venue, which is being held at Birmingham’s International Convention Centre.
The type of the security scare is unknown.
West Midlands Police tweeted this to alert people.
And just after 5pm the police said the lockdown had been lifted.
While it is routine at party conferences for police to temporarily restrict access for security reasons, it is unusual for a lockdown to be imposed for more than half an hour.
Conservative ministers have become increasingly exasperated by the policing of the event. Police have allowed noisy protestors to continue to approach delegates as they enter the complex.
Kwarteng's speech - verdict from Twitter commentariat
While much of the response inside the hall where Kwasi Kwarteng was delivering his speech appeared muted – with one of the loudest cheers reserved for repealing EU laws – media commentators were left underwhelmed by one of the shortest conference speeches delivered by a chancellor in modern times.
My colleague Rafael Behr says Kwarteng should have kept the speech to under five minutes.
James Forsyth from the Spectator says not announcing new policy was sensible.
George Eaton from the New Statesman says the speech was empty.
Tom Newton Dunn from Talk TV says he does not think the speech will impress Tories.
Hatty Collier from the i says Kwarteng was using understatement.
Freddie Hayward from the New Statesman says the speech was contradictory.
My colleague Jessica Elgot makes the same point.
Kevin Schofield from Huffpost UK points out what’s missing.
My colleague John Crace says it was vacuous.
Duncan Weldon, the economist and former BBC journalist, decided that the speech’s narrative was a confused one.
The broadcaster Sangita Myska says most of the speech sounded like rehash.
Sam Coates, deputy political editor at Sky News, picks up on how the chancellor’s words were an implicit criticism of Boris Johnson and Rishi Sunak, the former chancellor.
My colleague Gaby Hinsliff says Kwarteng mostly ignored the problems with the mini-budget.
Kevin Maguire of the Daily Mirror was particularly scathing.
And Christopher Hope had picked up on the initial reaction in the room as Kwarteng arrived.
New polling from Savanta ComRes suggests Labour has a 25-point lead over the Conservatives
Kwasi Kwarteng's speech - snap verdict
It is hard to think of a precedent for a chancellor delivering a party conference speech with absolutely no announcement of any kind in it. That speech was a news desert, devoid of anything new in terms of policy – or even language that move the argument into new terrain. I’m guessing, but I suspect perhaps there was an announcement pencilled in - that Liz Truss has pilfered it for her own speech on Wednesday. That would, at least, be logical; collectively they may have decided that there was no point wasting an announcement today, when the news cycle is dominated by the U-turn. The alternative – that Kwarteng just turned up with nothing to say – seems less likely.
Instead, all we got was a summary of the economic approach set out by Liz Truss during the Tory leadership campaign, and by Kwarteng in his mini-budget statement. But Kwarteng did not make it sound any more credible today than it has done in the past. He claimed the Conservative party had reversed “the story of national decline” when it came into office in 2010 – while at the same time explaining how the Truss government was having to reverse misakes made by the Tories over the past 12 years.
If the content was feeble, the delivery was even worse. Kwarteng sounded nervous, and he was rushing through it as if he could not wait to be off. He did not even seem to have worked out where the applause lines were meant to come.
Earlier I said the challenge facing Kwarteng with this speech was to show that he still has authority as a chancellor. (See 3.05pm.) It didn’t. If anything, it will have made his plight even worse.
Kwarteng has now finished.
He is getting a standing ovation – more out of sympathy, perhaps, than approval.
I will post a snap verdict shortly. But if you can’t wait, the word “dire” will do for now.
Kwarteng says: “Rather than bashing business, we are backing it.”
That is why the tax system needs to be simpler.
The government will reverse the planned increase in corporation tax, he says.
The reforms to IR35 will be reversed. They added unnecessary complexity for businesses.
He says the Tories have stood up for working people. They have delivered the lowest unemployment since the 1970s.
These are great achievements, Conservative achievements.
When the Tories came in, they were met with the full force of Labour’s economic incompetence. They reversed that national decline, he says.
Labour believes you can tax your way to growth. He says his party believes in low taxes: “We are Conservatives.”
Kwarteng says the government will deregulate in a series of areas: childcare, agriculture, immigration, planning, energy, business and financial services.
And he says the government will introduce reforms to stop strike action derailing reform.
Kwarteng pledges to review, replace or repeal retained EU law 'holding our country back'
Kwarteng says the UK will review, replace or repeal retained EU law “holding our country back”.
Kwarteng says as business secretary he saw the role business played. He also saw how government could get in the way. Now he wants to free business from regulation.
He says the government will cut regulations in investment zones.
Today they face new challenges, Kwarteng says. He says he will act in a fiscally sustainable and responsible way.
The fiscal plan will set out how debt will fall as a percentage of GDP over the medium term, he says.
He says the Tories are “serious custodians of the public purse”. This is what separates the Tories from Labour.
Kwarteng says the UK went into the Covid crisis in a much stronger position than other countries, because of actions taken by the Conservative government in advance.
The UK has the second lowest debt in the G7, he says.
Kwarteng says this was a substantial intervention.
The price of not acting would have been higher than the price of the scheme.
As well as helping people now, the government will address the energy supply problem, so the UK can never be blackmailed again.
Kwarteng says the whole of Europe is facing a problem caused by the invasion of Ukraine.
Business groups feared mass unemployment. This was a very real prospect for the country.
So, within days of taking office, they produced one of the most significant interventions by the government ever.
He says the government’s energy plan will last two years – not just six months, like Labour’s.
Kwarteng dismisses row generated by 45% tax plan as 'a little turbulence'
Kwarteng says the plan put forward 10 days ago has caused “a little turbulence”. He goes on: “I get it,” he says. The government listened.
I can be frank. I know the plan put forward only 10 days ago has caused a little turbulence.
I get it. I get it. We are listening and have listened, and now I want to focus on delivering the major parts of our growth package.
He was probably being ironic when he talked of “a little turbulence”, but this line makes him sound like Jacob Rees-Mogg. (See 3.57pm.)
Kwarteng says Britain was confronted with a tax burden at a 70-year high.
That is why they are cutting taxes.
Taken together, the mini-budget will help all people.
The energy package will save someone in a semi-detached home more than £1,000 this winter.
Kwarteng says the growth plan will ensure they focus on economic growth.
The path ahead was slow, managed decline.
But he refuses to accept that.
It should not be inevitable that the tax burden had to be at a 70-year high.
A new approach is needed – boosting growth to deliver more revenue for public services.
With economic growth, everyone benefits, he says.
Kwarteng pays tribute to Birmingham. “Graft and grit” made it succeed.
He says the industrial revolution started here. Those Britons built a thriving economy. They inspire him.
They show that, with the British people, anything is possible.
His mission is to get Britain moving.
Kwarteng starts his speech to Tory conference
Kwasi Kwarteng takes to the stage.
Thank you conference. What a day.
They have a plan, and they should get on and deliver it, he says.
Liz Truss has arrived for Kwasi Kwarteng’s speech.
The Simon Clarke speech is over. Kwasi Kwarteng is on next, we think.
Liz Truss seems to have pre-recorded an interview with Nick Robinson for the Today programme tomorrow. He will be hoping another major government policy doesn’t go overboard between now and 8.10am tomorrow. This is from the Today editor, Owenna Griffiths.
Clarke is arguing that Labour cannot be trusted on levelling up because it opposed Brexit.
The conference proceedings have now started, with a video address from Simon Clarke, the levelling up secretary. He is not in the hall in person.
He says levelling up is about transforming life chances.
Rees-Mogg claims 45% tax rate U-turn not significant
At a fringe meeting organised by the Daily Telegraph, Jacob Rees-Mogg, the business secretary, quoted Macbeth as he claimed the tax U-turn was insignificant. He said:
Sometimes things we want to do don’t receive the approbation of the nation …
One tax cut, of all of these the smallest in terms of money to the exchequer, has not been followed through. This has been a sound and fury that signifies nothing.
Asked if Kwasi Kwarteng should resign, Rees-Mogg said: “Of course he shouldn’t resign.”
Daniel Grainger, the chair of Young Conservative Network, who described Birmingham on Twitter as a “dump”, has temporarily quit his role, the Daily Mirror’s Aletha Adu reports.
Truss picked ‘cronies off backbenches’ for cabinet, says Heseltine
Liz Truss packed her cabinet with “cronies off the backbenches” rather than competent ministers with a range of views, and appeared to have no coherent plan behind her mini-budget, Michael Heseltine has said. My colleague Peter Walker has the story here.
Mel Stride, chair of the Commons Treasury committee and a key supporter of Rishi Sunak during the Tory leadership contest, told the World at One that one reason why he welcomed the tax U-turn was that it indicated the government was now showing some “pragmatism”. He explained:
What the parliamentary party is looking for now is pragmatism.
Because we’ve come forward, or the government has, with a number of unfunded tax cuts, that’s going to be deeply problematic in a number of ways, and it may be that there will be even yet further requirements to unwind some of those positions.
So, I think that it’s actually positive that there’s some pragmatism being shown, as well as I think a lot of colleagues will feel it’s a fair thing to do.
Irish PM Micheál Martin says Steve Baker's Brexit apology to EU and Ireland 'very, very helpful'
Micheál Martin, the taoiseach (Irish PM), has described the apology delivered by Steve Baker yesterday for the way some Brexiters ignored the concerns of the EU and Ireland about Brexit, as “very, very helfpul”. He said:
I welcomed not just [Baker’s] comments, but the tone of his comments. I think they were honest and very, very helpful.
And I look forward to continuing engagement with Minister Baker and others within the British government.
Why Tory rebels could find it harder to defeat PM over benefits or spending cuts
This morning Tory rebels achieved a significant win over the government when they persuaded Liz Truss and Kwasi Kwarteng to abandon plans to scrap the 45% top rate of income tax. The plan was in the mini-budget, announced 10 days ago, but yesterday was the first day since then when Tory MPs had been present in large numbers in the same place. It soon became obvious from what they were saying they would not support the 45% plan.
Truss’s critics are now expressing alarm about two other aspects of her plans: the very strong hints being given that benefits will not be uprated for 2023-24 in line with inflation, as was promised; and Kwarteng’s declaration that he will not top up departmental budgets to compensate for inflation (see 8.28am), implying real terms cuts.
But on these two issues the rebels will find it hard to force a rethink, for procedural reasons.
The abolition of the 45% top rate of tax is a matter that would have been included in a finance bill. MPs would have had to vote for it, and, with just 34 voting with the opposition, the government would face defeat.
MPs also have to vote on uprating benefits, but the process is different. The uprating is incorporated in a statutory instrument, not a government bill, and it cannot be amended. The opposition parties believe that, if MPs were to vote it down, there would be a risk of benefits not being uprated at all.
Similarly, MPs won’t get a clear vote on spending plans. Parliamentary control over government spending is limited and, although estimates have to be approved, it is not easy for MPs to orchestrate a vote for higher spending. Without the leverage provided by a vote the government may lose, government MPs have a lot less sway over the executive.
Schools minister confirms intention to lift ban on new grammar schools in England before election
Schools minister Jonathan Gullis has told a fringe meeting at the Conservative party conference he is hoping that legislation to lift the current ban on new grammar schools in England will be brought forward before the next election.
Gullis, a former teacher who has campaigned to scrap the ban and allow more grammar schools in England, told an Education Policy Institute event there was no date set and he didn’t know if it would be in this parliamentary session. He added:
I would hope there will be, before the next election, legislation brought forward to lift that ban.
The new education secretary, Kit Malthouse, has confirmed that the prime minister has asked him to look into expanding the selection system. Grammar schools however are likely to prove another divisive issue for the Conservative party.
On Sunday former education secretary Michael Gove spoke for many when he came out firmly against creating more grammar schools. He said:
Grammar schools are only an answer - if they are an answer - for a minority of pupils.
If we want to improve education in this country we have to improve it for all students and the evidence is that grammar schools favour the already better off. Setting out to use the money that we have in education to create new grammar schools would not address the inequality in our system. It would not raise standards.
We should not be looking backwards to an educational situation where we were dividing children between those destined for success and those who were overlooked. We need to make sure that every child has an outstanding education.
After Kwasi Kwarteng, the other speakers addressing the conference this afternoon are: Michelle Donelan, the culture secretary; Kemi Badenoch, the international trade secretary, Chloe Smith, the work and pensions secretary; Ranil Jayawardena, the environment secretary; and Jacob Rees-Mogg, the business secretary. They are due to finish at around 6pm.
Kwarteng set to address Tory conference with his authority on the line after 45% tax rate U-turn
Kwasi Kwarteng, the chancellor, will be delivering his speech to the Conservative party conference soon after formal proceedings in the hall commence at 4pm. CCHQ sent out embargoed extracts from his speech yesterday morning, but the email has not aged well. It is headlined – “Chancellor Kwasi Kwarteng: ‘We must stay the course. I am confident our plan is the right one.’”
I quoted the extract with that passage at 7.27am. Here is a second extract from the news release, in which Kwarteng will stress his “iron-clad commitment to fiscal discipline”. He will say:
With energy bills skyrocketing. A 70-year high tax burden. Slowing long-term growth rates. Painfully slow infrastructure delivery.
Should we really have just accepted that fate?
Think about the cost to livelihoods and the impact on our communities.
What Britain needs is economic growth. And a government wholly committed to economic growth.
That is why we will forge a new economic deal for Britain …
… backed by an iron-clad commitment to fiscal discipline.
More businesses. More jobs. Higher pay. More money for public services.
Because you cannot have a strong NHS without a strong economy.
You cannot have good schools without a strong economy.
You cannot have quality infrastructure without a strong economy.
With this plan, we are aiming for 2.5% annual trend growth.
We did it before. We can do it again.
This is the argument that Kwarteng and Liz Truss have been making for some time, but many economists and MPs are sceptical. Kwarteng seems to be arguing that it might be necessary to give less money to public services now so that they have more money in the future.
One challenge for him today will be to persuade his party that his growth strategy is credible.
But, of course, the broader challenge is to persuade people that he still has credibility, and that his authority has not been permanently banjaxed by today’s U-turn.
UK and EU to resume technical talks on Northern Ireland protocol this week
British and EU officials will resume “technical” talks this week on the Northern Ireland protocol, a European Commission spokesperson has said.
The exact details, including timing and topics for discussion, are still being worked out, the spokesperson said. The resumption of talks follows a phone call last Friday between the foreign secretary, James Cleverly, and the European Commission vice-president Maroš Šefčovič. This exchange was characterised as a “good conversation” by the EU executive, while Cleverly said they agreed they wanted “to look for solutions to protect the Belfast (Good Friday) agreement”.
Long-term Brexit watchers will remember there was an equally optimistic mood when the last foreign secretary took office. That was Liz Truss, who said in January there was “a deal to be done”. She later became more sceptical of negotiations with the EU and her controversial Northern Ireland bill, which threatens to rip up key parts of the Brexit agreement with the EU, remains on the table.
EU observers will be looking for whether her government takes forward the Northern Ireland bill. An apology to the EU and Ireland from the Northern Ireland minister and leading Brexiter Steve Baker suggests a climbdown could be on the cards. But there remains deep scepticism about the Truss government. One former Irish ambassador to the EU, Declan Kelleher, suggested it was too early to judge, tweeting: “EU including Ireland have to be able to repose trust in Liz Truss’s approach to the protocol. Let’s see how this develops.”
Even with tax U-turn, richest families still gain 40 times as much as poorest ones from mini-budget, says thinktank
The Resolution Foundation thinktank says the decision to keep the 45% top rate of income tax means the richest 10% have lost more than half of the gains they were going to make from the mini-budget.
But, in an analysis, it says the package remains regressive. It says (bold from original):
Still a very regressive policy package. A quarter of the cash gains from the remaining tax cuts package are going to the richest 5 per cent of households – far more than the 16 per cent of cash gains spread across the entire bottom half of the income distribution.
Richest households will gain almost 40 times as much as poorer families. The top 5 per cent of households are still set to gain £3,500 on average next year from the remaining tax cuts, compared to just £90 on average for the poorest fifth of households.
The thinktank also says Kwasi Kwarteng still needs to make “significant spending cuts” in the the fiscal plan on 23 November to compensate for the unfunded tax cuts worth £43bn still left in the mini-budget package.
Labour says it would be 'grotesque' not to increase benefits in line with inflation
Rachel Reeves, the shadow chancellor, has said it would be “grotesque” not to increase benefits in line with inflation. She told Sky News:
The idea that the government can afford to give tax cuts to the wealthiest, but not uprate benefits in line with inflation, I think is grotesque. And there are many people who are saying that the government needs to rethink this one as well.
The prime minister yesterday refused to say whether people with disabilities, people on universal credit, will see their benefits go up in line with inflation next year.
That uncertainty for people who are already seeing huge increases in their energy prices in the weekly food shop, it’s a time of huge anxiety. And yet the government seem to be that cutting taxes for people who are already on big salaries or businesses already making big profits, that seems to be their priority.
When Kathryn Samson from STV News interviewed Liz Truss yesterday, she asked her: “Prime Minister, do you enjoy chaos?” Truss claimed she did not know what Samson was implying.
In fact, if Truss had had the good sense to read this blog four days ago, she would have been reminded that she is on record as saying: “I embrace the chaos. I’m a thrill-seeker.” In that respect, her premiership is certainly living up to what she promised.
On Radio 4’s the World at One Sarah Montague has just revealed that Simon Clarke, the levelling up secretary, pulled out of an interview that he was due to give the programme that last moment.
That’s a shame, because it means Montague will not get the chance to ask him about the tweets he posted yesterday applauding the PM’s answer, when she told Laura Kuenssberg she was absolutely committed to abolishing the 45% tax rate. (See 6.50am.)
One of the problems with U-turns it that they leave ministers and MPs who have defended a policy looking daft.
The same is true of government supporters in the media. At Daily Telegraph HQ this morning the U-turn was probably greeted with horror. Today the paper is running an editorial under the headline “Liz Truss is not for turning” praising her for sticking with her plan to cut the top rate of income tax. “Liz Truss is clearly not a leader easily buffeted by events if she thinks she is right,” the article starts optimistically, but not accurately.
Former DWP secretary Esther McVey says it would be 'huge mistake' not to raise benefits in line with cost of living
Esther McVey, the former work and pensions secretary, has urged the government not to cut benefits when it swings the axe on public spending. She said it would be a “huge mistake” not to increase benefits in line with the cost of living.
The government has hinted that it will break with convention – and a promise made by Boris Johnson’s administration – and uprate benefits for 2023-24 by less than the inflation rate for September.
Calling for compassion, she said it would be a disaster to the Conservatives’ efforts to get vulnerable people back into work.
Speaking at a fringe meeting on the cost of living hosted by Centre for Social Justice thinktank, McVey, who is generally seen as being on the right of the party, said:
It would be a huge mistake not to give a cost of living increase in benefits. What we have to do is bring people back to work and that will not be done by slashing the benefits budget. We have got to be an enabler.
The benefits decision may turn out to be the next flashpoint for the government. Michael Gove, who led opposition to the abolition of the 45% tax rate yesterday, said this morning he would need “a lot of persuading” to approve not uprating benefits in line with inflation. (See 12.12pm.)
Opinium research unveiled at the fringe event showed “shocking” impact for those in “premium poverty” defined as people who have to pay extra to access goods and services.
Some 17% have turned to gambling to make more money while 11% said they were drinking more to “cope”.
Former culture secretary Nadine Dorries says Truss should call election if she wants mandate for new agenda
Generally it is the opposition parties who have been saying that the replacement of Boris Johnson as PM by Liz Truss should have been followed by a general election. But Nadine Dorries, the former culture secretary, has come close to calling for one too. Dorries thought Johnson should have stayed in office, and she is unhappy that some of the decisions she took as culture secretary are being reviewed.
Truss claims she is implementing what people voted for in 2019.
Tory mayor Ben Houchen says U-turn on 45% tax rate does not wholly solve problem because 'damage is already done'
Kwasi Kwarteng’s decision to cut income tax for the richest and subsequent U-turn has been given short shrift by senior Tory Ben Houchen, who has also called for the cap on bankers’ bonuses to be reinstated.
At a fringe event, the Tees Valley mayor said the chancellor had been “naive” and that while scrapping the top tax rate would generate more revenue for the exchequer, it was going down poorly with voters.
“Irrespective of the economics, it’s a little bit naive,” Houchen said. He claimed the row that has overshadowed the Conservatives’ conference was “so avoidable”. And he went on:
Even though we’ve rowed back the damage is already done - you’ve got all of the downsides of announcing that policy without actually implementing that policy.
He said despite the U-turn, the initial announcement would frame the public’s first impressions of the new government, adding it would be a “quite difficult” few weeks.
Houchen also urged Kwarteng to perform a second U-turn. Asked if the scrapping of the cap on bankers’ bonuses should be reversed, he said:
Yes I would. It’s just unnecessary, it doesn’t raise much money, it doesn’t save much money.
The economic argument is understandably a sound one but it’s the wrong time, in the wrong position given where most of the country currently sits. So, clear answer: yes I would.
Mark Littlewood, the head of the Institute for Economic Affairs thinktank (which called for the 45% top rate of income tax to be abolished before the mini-budget – see 10.28am) told the Today programme this morning that the tax U-turn would make it harder for people to trust the government to stick to its decisions in future. He said:
As a matter of principle I would have liked to have got rid of this rate, I think it’s a complication in the tax code, I think it raises virtually no money.
It’s even conceivable by scrapping it you might have raised more money.
But this has become a political hot potato, they have decided this is not the hill they’re going to die on, a tax that raises £2bn or so.
And they are going to hope this calms the markets.
Of course, it will raise the question that the next time Kwasi Kwarteng makes an announcement that Grant Shapps and Michael Gove don’t like, does that announcement stick?
Paul Johnson, director of the Institute for Fiscal Studies thinktank, has put out a longer statement with reaction to the tax U-turn, fleshing out a point he made on Twitter earlier. (See 11.11am.) He said:
The direct impact of the government’s U-turn on the abolition of the additional 45p rate of income tax is of limited fiscal significance. At a medium-run cost of around £2bn a year, it represented only a small fraction of the chancellor’s mini-Budget announcements. His £45bn package of tax cuts has now become a £43bn package - a rounding error in the context of the public finances.
The chancellor still has a lot of work to do if he is to display a credible commitment to fiscal sustainability. Unless he also U-turns on some of his other, much larger tax announcements, he will have no option but to consider cuts to public spending: to social security, investment projects, or public services. On the latter, the chancellor has indicated that departments’ cash spending plans that run to 2024-25 will be left unchanged [see 8.28am], which amounts to a real-terms cut in their generosity in the face of higher inflation. This will squeeze public services, but will not be enough to plug the fiscal hole the chancellor has created for himself.
No 10 says Truss still has confidence in chancellor
Downing Street has said that Liz Truss still has confidence in the chancellor, Kwasi Kwarteng. At the lobby briefing in London, asked if Truss has confidence in her chancellor, the prime minister’s spokesperson told reporters: “Yes.”
Yesterday Liz Truss conducted a series of interviews with ITV’s regional stations. They were recorded for broadcast tonight, but the 45p tax rate U-turn means some of the material is now very out-of-date, as this clip from Emma Hutchinson at ITV Anglia reveals.
The government’s 45p tax U-turn overshadowed attempts today by the Scottish Tory leader, Douglas Ross, to promote the Scottish Conservatives as “the real alternative to the SNP”.
Ross, whose leadership has been been questioned and who had been defending abolishing the 45p tax rate in recent days, told a fringe event at the Tory conference in Birmingham:
This morning, the chancellor has confirmed a change to the budget that was presented 10 days ago. I think he has made the right decision. The best parts of the government’s growth plans remain and the area that caused the most concern has gone.
Politicians have to listen and respond – and that’s exactly what the chancellor has done
Asked about claims that his leadership was now under threat, Ross said that he was “getting on with the job of holding the SNP to account”. He went on:
I read the stories, but if I get to Hogmanay and I am still leader then clearly I will have outlived the expectations of the Scottish media.
Gove says he's now willing to vote for mini-budget - but still unhappy about prospect of benefits not rising with inflation
Yesterday Michael Gove, the former levelling up secretary, refused to commit to voting for the mini-budget. He was particularly critical of the plan to abolish the 45% top rate of income tax, but he also said it was wrong to go ahead with unfunded tax cuts on this scale, which he said was “fundamentally not Conservative”.
Today he has told Times Radio he would now be willing to vote for the mini-budget. Unfunded tax cuts are not a deal-breaker for him, he implies.
Asked if he would vote for the tax measures, he said:
Yeah, I think so, on the basis of everything that I know …
There were lots of good things [in the mini-budget] and some potentially interesting things … The debate over the 45p tax increase obscured that. So I naturally - I’m still a Conservative MP, last time I checked and I’ll check in with the chief whip later - and therefore I will want to support and I think, on the basis of everything I’ve heard, there’s lots that can be enthusiastically supported.
But Gove also said he would need “a lot of persuading” to approve not uprating benefits in line with inflation.
I wouldn’t want to prejudge an argument that was put in front of me before the argument was made. Because in crises, you sometimes have to do things and embrace policies that would in other circumstances be deeply unattractive. But my basic position, my starting position is, yes, Boris was right [to promise to uprate benefits in line with inflation for the 2023-24 financial year].
Fracking 'not going to happen' because communities don't support it, says Damian Green
At the fringe event on the blue and red walls, Damian Green said fracking wouldn’t happen in the UK.
Noting that the government said the proposal would only be explored in communities who support it, Green went on:
The chance of any local community indicating consent for fracking is as close to zero as it can be. It’s not going to happen. It’s the wrong solution to the energy crisis.
Liz Truss needs six to 12 months of hard work 'to persuade public she's competent', says Damian Green
Damian Green, first secretary of state under Theresa May, says Liz Truss needs six to 12 months of hard work “to persuade the public she is competent”.
Talking at a fringe event looking at the so-called blue and red walls, Green welcomed the U-turn on the 45p tax cut for those earning over £150,000, as “exactly the right decision – if you are going to U-turn, U-turn rapidly”. He added:
The achilles heel of the Conservative party is the idea that it is the party of the rich …
Liz Truss needs six to 12 months of hard work to persuade the public that she is competent.
Commenting on Truss blaming poor communications for the almost universally negative reaction to the tax cut for the rich, Green said it was “really easy to blame bad communications for bad policy”. He said a lot of people would have looked at the policy and asked themselves: “Is this a time we want to be helping the rich?”
At the same event, Tom Hunt, elected as Conservative MP for Ipswich in 2019, also welcomed the U-turn. “There’s an economic case for [cutting the 45p rate], absolutely … but I had some sympathy for colleagues who were concerned about it,” he said.
Hunt defended the climbdown, saying:
I think the capacity to reflect is important. I would rather that than belligerently ploughing on.
TUC accuses Truss of breaking promise not to return to austerity
Frances O’Grady, the general secretary of the TUC, has accused Liz Truss of betraying a promise not to return to austerity. Referring to Kwasi Kwarteng’s declaration in his interview on the Today programme that he would not increase departmental budgets to compensate them for the impact of higher-than-expected inflation (see 8.28am), she posted this on Twitter.
In fact, Truss did not clearly promise no return to austerity during the Tory leadership contest. In July she said: “I’m very clear I’m not planning public spending reductions, what I am planning is public service reforms.” But promising not to cut existing spending plans is not the same as promising to increase them in line with inflation, and so in that quote she was only ruling out an actual spending cut, not a real-terms spending cut.
Other comments during her campaign implied that there would be real-terms cuts to departmental spending. This was acknowledged in an IFS briefing which said: “Liz Truss has promised to hold a new spending review, but it is possible that such an exercise could lead to lower, rather than higher, departmental budgets. She is, after all, promising more than £30bn per year of tax cuts.”
Truss also benefited from the fact that the implications of her plans for public spending received relatively little scrutiny during the campaign. During the hustings organised by the Conservative party, members asked very few questions about this, and Truss herself turned down interviews where she would have been subject to intensive scrutiny.
45% tax rate U-turn will have 'essentially no effect on fiscal sustainability' of mini-budget, says IFS
Paul Johnson, director of the Institute for Fiscal Studies thinktank, says the U-turn on the top rate of tax will not really make any difference to the fiscal sustainability of the mini-budget. In other words, he is saying it is still a huge package of unfunded tax cuts.
The government said abolishing the 45% top rate of tax could cost just £2bn a year – although at the time the IFS said it might cost nothing, but could also end up costing a lot more.
Stephen Crabb, the Conservative former work and pensions secretary, has told LBC that the government faces further trouble with its backbenchers over the mini-budget. MPs would object to wide-ranging spending cuts, he said.
These are from LBC’s Theo Usherwood.
The DUP is sticking to its position that the “best way” to resolve the dispute over Brexit trade arrangements in Northern Ireland is to “expedite the NI protocol bill”.
It is not issuing a statement following Northern Ireland minister Steve Baker’s extraordinary apology for not respecting Irish or EU’s “legitimate interests” in the past.
However, one source said they felt Liz Truss had rowed back “a little” from her resolve to take legal action to scrap parts of the protocol unilaterally.
“A negotiated outcome would be welcome but we tried negotiations for two years and the EU repeatedly stated ‘there could be no renegotiation’,” said a senior source.
Gerard Lyons, an economist who has given advice to the Liz Truss team, has said Kwasi Kwarteng was wrong to say that he was not warned that unfunded tax cuts would alarm the financial markets.
In his Today interview Kwarteng said he could not “remember” being warned by Lyons that the markets would not tolerate unfunded tax cuts. But Lyons told PA Media:
Well that’s incorrect. I was very clear.
Asked if he was pleased about the U-turn, Lyons replied:
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.
In his big read in Sunday Times yesterday Tim Shipman said it was Chris Philp, the chief secretary to the Treasury and Kwarteng’s deputy, who “during the leadership election wrote a paper for Truss recommending the abolition of the 45p tax rate”. My colleague Pippa Crerar was told the same.
According to George Parker from the FT, Philp is saying he wasn’t the main architect of the plan.
In the Observer yesterday Michael Savage identified another culprit. He said:
The Observer understands that the main advocate of a tax cut for the highest earners was Andrew Griffith, who was Boris Johnson’s policy chief and is now financial secretary to the Treasury.
As with much of what Liz Truss’s government is up to, it is also possible to pin responsibility on the Institute for Economic Affairs, the free market thinktank she favours. In a press release two days before the mini-budget, the IEA said the chancellor should:
Reform income taxes by unfreezing thresholds, abolishing the 45p income tax rate and removing the 60 per cent effective marginal tax rate at £100k-£125k, thus encouraging people to work.
Tory donor criticises tax U-turn, saying it's wrong being governed by media reaction 'which is not necessarily rational'
On the Today programme Alasdair Locke, a leading business figure and major Conservative party donor, said that he did not approve of the decision to scrap the abolition of the 45% top rate of tax.
Speaking after it was reported that Kwasi Kwarteng would abandon the policy, but before Kwarteng formally announced that at 7.30am, Locke said:
I think it would be unfortunate to be blown off course by a rather sensational media. The presentation was very poor. It’s the right direction of travel, however.
Generally, cutting taxes when you’re facing an economic downturn, if not a recession, seems to me to be a pretty obvious thing to do rather than to raise taxes.
The 45% rate is a bit of a distraction. It doesn’t raise much money. There’s some evidence, from the past certainly, that reducing that level of tax actually increases the overall tax take. So it is a bit of a distraction.
Asked what he thought of the decision to abandon the abolition of the 45% rate, Locke said:
I think we should be, as a party and as a government, careful about having what we do dictated by short-termism, by media reaction, by market reaction, which is not necessarily rational. We shouldn’t be blown off course.
When it was put to Locke that senior Tory MPs like Michael Gove and Grant Shapps said the 45% rate should stay, Locke replied:
Just because you are a senior Conservative MP doesn’t necessarily make you a savant.
And here is some Twitter commentary from political journalists on the U-turn.
From the i’s Paul Waugh
From the Spectator’s James Forsyth
From my colleague Jessica Elgot
From the FT’s Jim Pickard
From the broadcaster and author Steve Richards
Joe Twyman from Deltapoll thinks today’s U-turn will only give the Tories a relatively small boost in the polls. Recent polls have given the Labour party huge leads.
Nigel Farage, the former leader of Ukip and then the Brexit party, warmly welcomed the mini-budget. Now he is claiming the U-turn could be a step towards a 1997-style electoral disaster for the Tories.
Ed Davey, the Lib Dem leader, says Kwasi Kwarteng should resign.
Liz Truss has tweeted about the U-turn, echoing what Kwasi Kwarteng said.
As Sky’s Ed Conway reports, the U-turn has also led traders to revise down their expectation of how high interest rates will go next year.
UK government bonds strengthen after tax U-turn
As Graeme Wearden reports on the business live blog, the pound went up this morning following the government’s U-turn.
This is from Sky’s Ed Conway.
In his blog Graeme also says the cost of government borrowing is also falling. He says:
Kwasi Kwarteng’s U-turn on the top rate of tax seems to be calming the gilt market, after prices tumbled in the panicky selloff following the mini-budget.
This has pushed down the cost of short and medium-term government borrowing (known as the yield on the bonds, which fall when prices rise).
The benchmark 10-year UK gilt yield has dropped by 10 basis points, to 4%, from 4.1% on Friday night.
Last week it spiked as high as 4.5%, having been just 3.5% before Kwarteng announced his unfunded tax cuts and spending pledges.
Tony Danker, director general of the CBI, has welcomed the U-turn. He told the Today programme:
Here was a package with some really strong economic reforms that businesses have been waiting for for years in fact and clearly, politically, the 45p had become a distraction. And, probably more importantly, businesses up and down the country want the markets to stabilise, that is an absolute pre-condition to investment and growth. And it’s a pre-condition to getting on to these very good reforms, so yes, I think it’s a good development this morning.
Nicola Sturgeon, Scotland’s first minister, says the U-turn reveals the government’s “utter ineptitude”.
Kwarteng claims he feels 'humility and contrition' over 45% top rate of tax U-turn
Q: Do you owe an apology to MPs who were threatened with the prospect of having the whip removed if they refused to vote for abolishing the 45% top rate of tax?
Kwarteng says this is not just about MPs. The government has listened to people in the country too.
Q: You can apologise to them too?
Kwarteng does not apologise. But he says the government is not going ahead with the move. And he goes on:
There is humility and contrition in that, and I’m happy to own it.
And that’s it. The Today interview is over.
Q: Have you considered your position?
Not all all, Kwarteng says.
Q: Why not?
Because he is focused on the growth plan, Kwarteng says.
Robinson says that is not a proper answer.
Q: Economist say the mistake you made was taking markets by surprise, sidelining experts like the permanent secretary and the OBR and rubbishing the Bank of England.
Kwarteng says he has never rubbished the Bank of England.
Robinson says the Liz Truss campaign, that Kwarteng supported, constantly argued the Bank of England had got things wrong.
Kwarteng rules out giving departments £18bn needed to compensate for higher than expected inflation
Q: You presented your mini-budget, having sacked your permanent secretary, without consulting the Office for Budget Responsibility.
Kwarteng says the government had to act quickly.
Q: Will there be further tax cuts, as he said on Laura Kuenssberg’s show eight days ago.
Kwarteng says the government will present his spending plans, and then have a budget.
Q: There are 51 days until the medium-term fiscal plan. But the markets can react in hours. Will you cut spending to fund your tax cuts.
Kwarteng says he is committed to the spending review of 2021.
Q: That means you will not spend more on departments, to compensate them for inflation. That means they will have to find around £18bn to compensate for higher inflation.
Kwarteng says it is important to stick within the envelope of the CSR – the comprehensive spending review.
Q: You said after the mini-budget “the markets will react as they will”. Doesn’t that mean there is a Kwarteng premium on mortgages?
Kwarteng accuses Robinson of presenting a one-sided view of reality.
He says international factors are behind the interest rate moves.
He says Robinson is not presenting “a full picture of reality”. He suggests Robinson has not been listening to him.
The Federal Reserve has been ahead of other central banks in raising interest rates. That is why there is a strong dollar. Other banks have had to follow.
Q: Are you claiming your measures had nothing to do with the market reaction?
Kwarteng says he is saying international factors were relevant.
Q: Why did you sack Tom Scholar as permanent secretary at the Treasury?
Kwarteng says he will not comment on personnel matters. But he says he has praised Scholar’s record as a civil servant.
Kwarteng dismisses suggestion that Truss was blaming him for 45p plan in her BBC interview yesterday
Kwasi Kwarteng is being interviewed by Nick Robinson on the Today programme.
Kwarteng starts by challenging Robinson’s claim that the Bank of England has had to spent £65bn. It is a facility allowing spending up to that, he says.
Q: If the 45p rate is a distraction now, why wasn’t it yesterday, when the PM said she was committed to it?
Kwarteng says they were absorbing information all the time.
He says “we’ve decided, I’ve decided” not to go ahead with the 45p rate.
Robinson quotes from the trail of Kwarteng’s speech later today released overnight. (See 7.27am.) You have been forced into a U-turn.
Kwarteng says they were listening.
Q: Do you still think it would be good to abolish the 45p rate. Are you only dropping it because you would not get it through?
Kwarteng says they have listened, and decided not to go ahead with it.
Q: The PM said yesterday it was your policy.
Kwarteng suggests Liz Truss, in her comment yesterday, was just making the point that the chancellor is in charge of budgets.
He says she agreed with the policy.
Labour says the U-turn is too late, because the mini-budget is already leading to higher mortgates
Rachel Reeves, the shadow chancellor, says the U-turn has come too late, because the mini-budget is already leading to higher mortgages for families. In a statement, she said:
The prime minister has been forced to abandon her unfunded tax cut for the richest one percent - but it comes too late for the families who will pay higher mortgages and higher prices for years to come.
The Tories have destroyed their economic credibility and damaged trust in the British economy.
There’s no plan to clear up the mess of 12 years of Tory government. They’re making it up as they go along.
This is not over – – it’s not just some distraction.
The Tories need to reverse their whole economic, discredited trickle down strategy.
Their kamikaze budget needs reversing now. As the party of fiscal responsibility and social justice, it will come to the Labour party to repair the damage this Tory government has done.
Q: How did you feel about the attack on you at the Labour party?
It was astonishing, Kwarteng says. In the Labour party you have to be the right sort of black person.
The LBC interview is now over.
Today is next, at 8.10am.
Kwarteng says it was mistake attending champagne reception for Tory donors on day of mini-budget
Kwarteng repeats the point about listening to people.
Ferrari says LBC spoke to people in Kwarteng’s Spelthorne constituency in Surrey at the weekend. Some said they would have to go to the pub this winter in the evenings because they could not afford to heat their homes.
Kwarteng says that is why the government introduced the energy package.
Q: Will there be more U-turns? Will you abandon the plan to lift the cap on bankers’ bonuses?
Kwarteng says he is “totally focused” on the growth plan.
Q: Grant Shapps said you were tin-eared.
Kwarteng says he is not tin-eared. He has been listening.
Q: Why did you go to a party with hedge fund managers after the mini-budget?
Kwarteng says it was an event organised by the Conservative party. He was only there for about quarter of an hour, maybe more.
I spent, I think, quarter of an hour there, or maybe a bit longer. It was a party event, we have party events all the time.
Q: Do you regret going?
I think it was a difficult call and I totally get how it looks. I just feel that it was something that I was signed up to do and I had to do
He goes on:
With hindsight it probably wasn’t the best way to go.
Q: Will there be more austerity measures?
Kwarteng replies: “I don’t think so at all.” He is focused on growth, he says.
Kwarteng rejects claims that it was plan to abolish 45% rate that triggered need for £65bn Bank of England intervention
Q: What was the reasoning for this?
Kwasi Kwarteng says they talked to people. “I totally get it.” He says he thought the 45p rate abolition had become a distraction.
He spoke to MPs, councillors and people in the country.
This was a huge distraction. He goes on:
I decided, along with the prime minister, that the best thing to do was simply not proceed with the abolition of the rate.
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.
Q: In other walks of life you would be sacked.
Kwarteng does not accept that. He says it is good to learn from your mistakes.
I don’t think that is the case at all. I think people actually have the maturity to learn from things that haven’t gone right.
And also in politics, absolutely in politics, you have to listen to people, you have to understand that you are not going to get 100% of things right all the time and when you listen you do have, in the spirit of humility, to take on board what people are saying.
Q: But the Bank of England had to spend £65bn intervening to compensate for the turmoil this created.
Kwarteng does not accept that. He says the plan to abolition of the 45% top rate of tax was not what triggered the need for that.
Kwasi Kwarteng is about to be interviewed by Nick Ferrari on LBC.
Q: What else are you going to U-turn on? Will you bring forward the publication of the medium-term fiscal plan, due towards the end of November?
Kwarteng dodges the question, but he says he is “very pleased” the decision has been taken not to go ahead with abolishing the 45% top rate of tax.
Q: You make it sound like it was not your idea?
Kwarteng says: “I’ve said to take responsibility for it.”
The BBC Breakfast interview is over.
Kwarteng suggests Truss took decision to perform U-turn
Q: Do you admit it was a mistake?
What I admit was that it was a massive distraction on what was a strong package.
Q: Liz Truss said she was prepared to take unpopular decisions. But she has buckled.
Kwarteng says the government has taken many tough decisions.
Q: Should you have listened much, much earlier?
Kwarteng says we can always have a debate about timing. He says the point now is to move on.
Q: Rishi Sunak warned these policies would be a mistake during the campaign.
Kwarteng says Liz Truss campaigning on not going ahead with the corporation tax rise and reversing the national insurance increase. Those policies are being implemented, and they have been welcomed.
He says there was a strong set of measures. He goes on to say “the prime minister decided not to proceed with the abolition [of the 45p rate]”.
Q: So it was her decision?
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.
'Not at all' - Kwarteng says he has not considered resigning over 45% top rate tax policy
Q: Where does this leave your credibility?
Kwarteng says he has been in parliament for 12 years. He says ministers do sometimes change their minds.
Q: But this wasn’t the pasty tax. This was a key proposal.
Kwarteng says 95% of the package is what they want to focus on 100%. He and the PM decided that it was best to drop this proposal, so they could focus on the rest of the package.
Q: Did you talk to the PM about this last night?
Kwarteng says he and Liz Truss speak the whole time.
They spoke to lots of colleagues.
I decided, along with the the prime minister, not to proceed [with the policy].
Q: Have you considered resigning?
“Not at all,” says Kwarteng.
He repeats the point about 45p being a distraction.
Kwarteng tells BBC Breakfast that 45p plan a 'distraction' from 'good set of policies'
Kwasi Kwarteng is now being interviewed on BBC Breakfast.
He says there is a lot of good stuff in the growth plan.
But the plan to abolish the 45% top rate of tax was a “distraction” from “a good set of policies”.
Q: You were defending it only yesterday. What changed?
Kwarteng said they listened to people. The row about it was drowning out other aspects of the plan.
Kwarteng confirms U-turn on abolition of 45% top rate of tax, saying plan was 'distraction' and 'we get it'
Kwasi Kwarteng, the chancellor, has just released a statement confirming that the government has abandoned the plan in the mini-budget to abolish the 45% top rate of income tax. He says the proposal has become a “distraction from our overriding mission to tackle the challenges facing our country”. He goes on (David Cameron-style – Cameron used to use this phrase): “We get it, and we have listened.”
Kwasi Kwarteng is addressing the Conservative party conference this afternoon, at 4.10pm. The Conservative party released extracts from it overnight, and it includes the line: “We must stay the course. I am confident our plan is the right one.”
Here is the full extract.
We must face up to the facts that for too long our economy has not grown enough.
The path ahead of us was one of slow, managed decline.
And I refuse to accept that it is somehow Britain’s destiny to fall into middle income status …
Or that the tax burden reaching a 70-year-high is somehow inevitable.
It isn’t, and shouldn’t be.
We needed a new approach, focused on raising economic growth.
That is the only real way to deliver higher wages, more jobs, and crucially, revenue to fund our precious public services…
… and it is the only way to achieve long-term fiscal sustainability.
We must stay the course. I am confident our plan is the right one.
Liz Truss was defending tax cuts only last night. At a party hosted by the Conservative 1922 Committee, she told guests:
Frankly, we haven’t made enough Conservative arguments for the past few years. Take taxes.
Taxes are not something that the government owns. They’re something that individuals work hard to create that income and we take it from them, so we have to be very careful about making sure what we take from them is value for money.
Business is a good thing. making profit is a good thing. The City is a good thing and our financial services are a good thing. And we need to be prepared to make that argument because we all care desperately about levelling up.
There were fewer Tory MPs than usual at the event, and Truss received muted applause, rather than loud cheers.
Grant Shapps, the former transport secretary, wrote an article for today’s Times saying it was wrong to abolish the 45% top rate of tax. He said:
Suddenly, the approaching end of a typical two-year fixed-rate mortgage has become — like the freezing nights of January — a thing to be feared. Households that must count their budgets down to the last £20 are facing hikes in mortgage repayments potentially in the hundreds.
Yet, as all this is happening, the prime minister and her chancellor are pushing ahead with the abolition of the 45p income tax rate for those earning £150,000 or more. These are people, bankers and other professionals, who can shrug off almost anything the energy companies can throw at them. And now they are to be awarded annual windfalls of maybe £10,000.
As a Conservative, I believe passionately in lower taxes, and a vibrant, competitive City of London, but this is not the time to be making big giveaways to those who need them least. When pain is around, pain must be shared.
Shapps is now being interviewed on the Today programme and he welcomes the change, which he says was “inevitable”. The policy was wrong because it “jarred”, he says.
There was one suggestion yesterday that the vote on the measuse would be delayed until the spring, to give the government time to win round its MPs, he says. But that was not realistic, he claims
Q: Was it Truss’s decision to perform the U-turn or Kwasi Kwarteng’s?
Shapps says he does not know. But he thinks Kwarteng recognised that the policy had to change.
The Labour MP Ben Bradshaw claims the U-turn is turning the UK into a laughing stock.
David Willetts, the former Tory universities minister who is now president of the advisory council for the Resolution Foundation thinktank, told the Today programme that he thought the 45% top rate of tax U-turn was inevitable. He explained:
I think [Kwasi Kwarteng, the chancellor] had to do it because the fact is you can’t say there are lots of tough decisions and people are going to have to take pain in order to raise the growth rate and at the same time offer this particular tax cut, helping the most affluent members of our society.
I think he could sense the pressure building and he’s done the right thing.
Willetts also said that, even if the government shelves plans to abolish the 45% top rate of income tax, Kwarteng might still have to make further public spending cuts to make the public finances add up, in the light of his other unfunded tax cuts. And Willetts said those cuts would also have to pass a fairness test.
How Liz Truss said she was absolutely committed to abolishing 45% top rate of tax yesterday
This is what Liz Truss said about the 45% top rate of income tax in her BBC interview with Laura Kuenssberg yesterday.
Kuenssberg asked: “Are you absolutely committed to abolishing the 45p tax rate for the wealthiest people in the country?”
And Truss replied:
Yes. And it is part, Laura, it is part of an overall package of making our tax system simpler and lower.
Truss expected to abandon plan to abolish 45% top rate of income tax
Good morning, and we are starting early this morning because it is being reported that Kwasi Kwarteng, the chancellor, is about to announce a huge U-turn. Only yesterday Liz Truss told the BBC’s Laura Kuenssberg that she was committed to sticking to the plan, announced in the mini-budget, to abolish the 45% top rate of tax. Now the government is set to ditch it – after it became clear on the first day of the Conservative party conference that Truss would face a huge rebellion if she tried to force her MPs to vote for it.
The Sun’s political editor, Harry Cole, first broke the news of the U-turn last night. He is co-writting a biography of Truss, and is one of the journalists seen as being close to her administration.
The BBC’s Nick Eardley has stood up Cole’s scoop.
This will be a colossal U-turn. One of the unofficials laws of journalism is that U-turns always have to be described as humiliating, and this one – coming at party conference, only 24 hours after Truss said the 45% top rate of tax was definitely going – is about as big as they come. It seems worse that Philip Hammond abandoning plans to increase national insurance contributions for the self-employed in 2017 – probably the last major U-turn on a budget measure. For a U-turn on this scale, you probably have to go back to Gordon Brown in 2008 finally admitting that the abolition of the 10p starting rate of tax penalised some poor workers and authorising a big spending package to compensate them.
On the plus side, although humiliating, U-turns can provide an opportunity for recovery. The only thing worse than abandoning an unpopular keynote policy is not abandoning it. Truss arrived at this conference with people in her party speculating that she might be gone by Christmas, and this offers her a way out.
On the other hand, the Gordon Brown comparision may be telling. The abolition of the 10p starting rate of tax turned out to be a political disaster for him – not least because, once the consequences became apparent, initially he reverted to denial mode – and even though he performed a U-turn, he never fully recovered from the damage it did to his authority.
Kwarteng is doing interviews this morning, and so we will hear from him directly soon.
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