UK’s Kwarteng refuses to rule out tax U-turn as pressure grows on Truss

LONDON, Oct 13 (Reuters) – British finance minister Kwasi Kwarteng refused to say on Thursday if he would stick with his plan not to raise business taxes as media reported Prime Minister Liz Truss was rethinking an economic programme that plunged markets into turmoil.

Truss’s plan, announced last month, has caused a rout in the government bond market, with some investors and Conservative Party lawmakers calling on her to reverse a plan for 43 billion pounds ($48 billion) of unfunded tax cuts, including a move to hold corporation tax at just 19%.

“Our position hasn’t changed, I will come up with the medium term fiscal plan on the 31st of October, as I said earlier in the week, and there will be more detail then,” Kwarteng told BBC TV in Washington where he is attending a meeting of the International Monetary Fund (IMF).

Asked specifically about whether there would be a reversal of the corporation tax plans, he replied: “My total focus … is on delivering on the mini-budget and making sure that we get growth back into our economy.”

His remarks came after Sky News cited sources as saying discussions were under way over whether to scrap some parts of the plan, and the Sun newspaper said Truss was now considering raising corporation tax after all.

Truss’s Downing Street office has repeatedly said the government was not changing course on the plan.

The pound, which has fallen sharply since Truss emerged as the front-runner to become prime minister in August, leapt against the U.S. dollar on the reports and British government bond prices recovered some of the steep losses incurred since Kwarteng’s “mini-budget” announcement on Sept. 23.

Quizzed as to whether there were discussions going on back in Downing Street to tear up his package, he said: “I speak to the prime minister all the time, and we are totally focused on delivering the growth plan.”

Truss has come under huge pressure from within her governing Conservative Party to change course as polls show support has collapsed, with some lawmakers pondering whether she should be removed from the job only a month after becoming prime minister.

The government has repeatedly said it would stick to most of her tax cut plans while also protecting public spending, but economists and critics say something has to give.

IMF Managing Director Kristalina Georgieva said she had discussed with Kwarteng the importance of “policy coherence and communicating clearly”.

“I do believe that it is correct to be led by evidence. If the evidence is that there has to be a recalibration, it is right for governments to do so,” she told reporters. read more

LEADERSHIP

Amid turbulence in the financial markets and plummeting support in the polls, there has been growing vocal criticism of the government’s overall plans from some Conservative lawmakers, many of whom who never wanted Truss to replace Boris Johnson as leader.