Wed. Sep 28th, 2022

(Adds detail)

By Andy Bruce and William James

LONDON, Sept 23 (Reuters) – Britain’s new economic
agenda of tax cuts and high spending do not represent a gamble
because improved economic growth will pay for it, cabinet
minister Simon Clarke said ahead of a major fiscal announcement
on Friday.

Close to 200 billion pounds ($225 billion) of tax cuts,
energy subsidies and planning reforms are due to be announced by
new finance minister Kwasi Kwarteng as part of Prime Minister
Liz Truss’s bid to spur growth.

Earlier this week the Institute for Fiscal Studies think
tank said the plans represented a “gamble” on growth – a charge
Clarke, the secretary for levelling-up, rejected on Friday.

“The evidence of the 1980s and the 1990s is that a dynamic
low tax economy is what delivers the best growth rates. This
isn’t a gamble, the weight of history and evidence is with us,”
he told the BBC.

Asked by Sky News if his view last year – when he was deputy
finance minister – that some tax increases would be needed to
repair government finances after the pandemic still applied,
Clarke said: “No, because what you’re doing now is that you’re
going for growth.”

“The critical thing is we need to get the economy growing so
that, frankly, the economic growth trajectory outstrips that of
our debt.”

Truss has aspirations to double the long-run rate of British
annual economic growth to 2.5%. On Thursday the IFS warned that
failure to improve growth would leave British government debt on
an unsustainable trajectory.

Clarke said the metrics of success would be in improved
economic growth.

“The markers will be increased economic activity in 2022 and
through the course of 2023, showing a sharp upward trajectory in
UK growth,” he told the BBC.

Mel Stride, another former Treasury minister and now chair
of parliament’s Treasury committee, criticised the government’s
decision to announce a large fiscal package without accompanying
forecasts from the Office for Budget Responsibility.

“This is not just a run-of-the-mill fiscal event, this is a
very, very significant fiscal event indeed, including very
substantial and permanent tax cuts which will have an impact on
the fiscal rules that…we hold up as the gold standard,” he
told Sky News.

Kwarteng has said he is “unashamedly” pro-growth but has
also stressed his commitment to fiscal discipline in the
medium-term.
(Writing by Andy Bruce; Editing by Kate Holton and Hugh Lawson)

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