Kwasi Kwarteng suggests champagne reception was a mistake after confirming U-turn on 45p tax rate plan

From 2h ago

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?

Kwarteng says:

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.

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As Graeme Wearden reports on the business live blog, the pound went up this morning following the government’s U-turn.

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This is from Sky’s Ed Conway.

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The pound jumped following news of the u-turn on the 45p rate abolition pic.twitter.com/KqGKok1hur

— Ed Conway (@EdConwaySky) October 3, 2022

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In his blog Graeme also says the cost of government borrowing is also falling. He says:

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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.

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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).

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The benchmark 10-year UK gilt yield has dropped by 10 basis points, to 4%, from 4.1% on Friday night.

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Last week it spiked as high as 4.5%, having been just 3.5% before Kwarteng announced his unfunded tax cuts and spending pledges.

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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?

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Kwarteng says this is not just about MPs. The government has listened, to people in the country too.

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Q: You can apologised to them too?

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Kwarteng does not apologise. But he says the government is not going ahead with the move. And he goes on:

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There is humility and contrition in that, and I’m happy to own it.

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And that’s it. The Today interview is over.

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Kwasi Kwarteng is being interviewed by Nick Robinson on the Today programme.

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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.

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Q: If the 45p rate is a distraction now, why wasn’t it yesterday, when the PM said she was committed to it?

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Kwarteng says they were absorbing information all the time.

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He says “we’ve decided, I’ve decided” not to go ahead with the 45p rate.

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Robinson quotes from the trail of Kwarteng’s speech later today released overnight. (See 7.27am.) You have been forced into a U-turn.

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Kwarteng says they were listening.

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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?

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Kwarteng says they have listened, and decided not to go ahead with it.

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Q: The PM said yesterday it was your policy.

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Kwarteng suggests Liz Truss, in her comment yesterday, was just making the point that the chancellor is in charge of budgets.

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He says she agreed with the policy.

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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:

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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.

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The Tories have destroyed their economic credibility and damaged trust in the British economy.

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There’s no plan to clear up the mess of 12 years of Tory government. They’re making it up as they go along.

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This is not over – – it’s not just some distraction.

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The Tories need to reverse their whole economic, discredited trickle down strategy.

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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.

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Kwarteng repeats the point about listening to people.

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Kwarteng says that is why the government introduced the energy package.

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Q: Will there be more U-turns? Will you abandon the plan to lift the cap on bankers’ bonuses?

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Kwarteng says he is “totally focused” on the growth plan.

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Q: Grant Shapps said you were tin-eared.

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Kwarteng says he is not tin-eared. He has been listening.

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Q: Why did you go to a party with hedge fund managers after the mini-budget?

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Kwarteng says it was an event organised by the Conservative party. He was only there for about quarter of an hour, maybe more.

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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.

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Q: Do you regret going?

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Kwarteng says:

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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

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He goes on:

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With hindsight it probably wasn’t the best way to go.

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Q: Will there be more austerity measures?

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Kwarteng replies: “I don’t think so at all.” He is focused on growth, he says.

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Q: What was the reasoning for this?

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Kwasi Kwarteng says they talked to people. “I totally get it.” He says he thought the 45p rate abolition had become a distraction.

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He spoke to MPs, councillors and people in the country.

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This was a huge distraction. He goes on:

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I decided, along with the prime minister, that the best thing to do was simply not proceed with the abolition of the rate.

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I was responsible for the budget, I take full responsibility for that, I was looking around the world and looking at competitive tax rates.

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But I think governments have to listen.

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Q: In other walks of life you would be sacked.

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Kwarteng does not accept that. He says it is good to learn from your mistakes.

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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.

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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.

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Q: But the Bank of England had to spend £65bn intervening to compensate for the turmoil this created.

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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.

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Q: Do you admit it was a mistake?

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Kwarteng replies:

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What I admit was that it was a massive distraction on what was a strong package.

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Q: Liz Truss said she was prepared to take unpopular decisions. But she has buckled.

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Kwarteng says the government has taken many tough decisions.

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Q: Should you have listened much, much earlier?

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Kwarteng says we can always have a debate about timing. He says the point now is to move on.

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Q: Rishi Sunak warned these policies would be a mistake during the campaign.

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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.

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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]”.

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Q: So it was her decision?

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Kwarteng replies:

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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.

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Q: Where does this leave your credibility?

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Kwarteng says he has been in parliament for 12 years. He says ministers do sometimes change their minds.

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Q: But this wasn’t the pasty tax. This was a key proposal.

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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.

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Q: Did you talk to the PM about this last night?

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Kwarteng says he and Liz Truss speak the whole time.

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They spoke to lots of colleagues.

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I decided, along with the the prime minister, not to proceed [with the policy].

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Q: Have you considered resigning?

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“Not at all,” says Kwarteng.

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He repeats the point about 45p being a distraction.

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Kwasi Kwarteng is now being interviewed on BBC Breakfast.

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He says there is a lot of good stuff in the growth plan.

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But the plan to abolish the 45% top rate of tax was a “distraction” from “a good set of policies”.

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Q: You were defending it only yesterday. What changed?

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Kwarteng said they listened to people. The row about it was drowning out other aspects of the plan.

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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.”

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We get it, and we have listened. pic.twitter.com/lOfwHTUo76

— Kwasi Kwarteng (@KwasiKwarteng) October 3, 2022

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This is what Liz Truss said about the 45% top rate of income tax in her BBC interview with Laura Kuenssberg yesterday.

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Kuenssberg asked: “Are you absolutely committed to abolishing the 45p tax rate for the wealthiest people in the country?”

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And Truss replied:

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\n

Yes. And it is part, Laura, it is part of an overall package of making our tax system simpler and lower.

\n

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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.

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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.

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🚨🚨🚨

NEW: Liz Truss preparing to ditch 45p rate TODAY after late crisis talks with Chancellor

Humiliating climb down plan comes after day of acrimony on Brum

Announcement expected in morn in body blow to new Government

No denial from No10 this eve https://t.co/He8qwMayou

— Harry Cole (@MrHarryCole) October 2, 2022

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The BBC’s Nick Eardley has stood up Cole’s scoop.

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Big Government u-turn coming this morning.

As @MrHarryCole reported overnight, the Govt ISN'T going ahead with scrapping the 45p top rate of income tax.

Chancellor on @BBCBreakfast and @BBCr4today https://t.co/IqVb5GEX7b

— Nick Eardley (@nickeardleybbc) October 3, 2022

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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.

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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.

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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.

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Kwarteng is doing interviews this morning, and so we will hear from him directly soon.

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Comments will be opened later today. I try to monitor the comments below the line (BTL) but it is impossible to read them all. If you have a direct question, do include “Andrew” in it somewhere and I’m more likely to find it. I do try to answer questions, and if they are of general interest, I will post the question and reply above the line (ATL), although I can’t promise to do this for everyone.

","elementId":"0c058946-362c-4193-9ae3-dcde34c9463e"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

If you want to attract my attention quickly, it is probably better to use Twitter. I’m on @AndrewSparrow.

","elementId":"e6e0b6da-bf90-43db-907b-fea5ba4192c3"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"

Alternatively, you can email me at andrew.sparrow@theguardian.com

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