THE Scottish Tories have backed the UK Government’s tax cuts despite an extraordinary intervention from the International Monetary Fund (IMF) and the collapse of the value of the pound.
Chancellor Kwasi Kwarteng announced swingeing tax cuts for the wealthiest late last week, leading the IMF to urge the Tories to “reevaluate” their policy.
In a statement, the international body said that Kwarteng’s policies were unwise “given elevated inflation pressures” and warned they would “likely increase inequality”.
However, appearing on the BBC’s Good Morning Scotland, Tory MSP Graham Simpson claimed not to have heard about the IMF’s intervention.
"What's the criticism?" he asked, adding: "That's the first I've ever heard of it. You've sprung that one on me."
After being read the body’s statement – and told that it was a top story “across every outlet” – Simpson said: "I think there is an opportunity in November [at the Autumn Budget] for the Chancellor to look at helping people at the lower end of the income scale.
“I would like him, and this is just a personal view I’m expressing, I would like him to look at helping those on Universal Credit to make it easier for people to move into work. There’s one idea which is just off the top of my head.”
Simpson was then asked if the UK Government should “rethink the high levels of borrowing which they’re embarking on to fund tax cuts for the higher paid”, which are likely to cause further inflation.
He responded: “Oh no no no no no. I’m fully in favour of what the Chancellor has done so far, I like what he’s done. I think the measures he’s taken will help people, they are helping people, and could well lead to more growth which is what we need.”
Simpson added: “Credit where it’s due, I think the Chancellor has taken some bold measures so far and I think so far he has been doing a good job.”
The Tory MSP’s comments come after Douglas Ross (above) demanded that Scotland follow the London government in cutting taxes.
Analysis from The National revealed that several of Ross’s Scottish Tory MSPs stood to benefit to the tune of thousands of pounds a year should such cuts be brought in.
Also appearing on the BBC Radio Scotland show on Wednesday morning, the political editor of the Financial Times, George Parker, said the market’s verdict on Kwarteng’s policies had been a “very negative one”.
“Having the IMF weighing in is obviously not going to reassure the markets at all,” he added.
Parker said that the any Tory MPs already sending letters of no confidence in Liz Truss's government represented the minority view, but said one Conservative had told him the new Prime Minister would find herself in big trouble if things had not settled by Christmas.
In response to the IMF criticism a Treasury spokesperson said: “We have acted at speed to protect households and businesses through this winter and the next, following the unprecedented energy price rise caused by [Vladimir] Putin’s illegal actions in Ukraine.”
The Government said it was “focused on growing the economy to raise living standards for everyone” and the Chancellor’s statement on November 23 “will set out further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP [gross domestic product] in the medium term”.
Shadow chancellor Rachel Reeves said: “The Government must urgently lay out how it will fix the problems it created through its reckless decisions to waste money in an untargeted cut in the top rate of tax.
“Waiting until November is not an option. The Government must urgently review the plans made in their fiscal statement last week.”
The Bank of England’s chief economist Huw Pill also warned the Tories “cannot be indifferent” to the developments of the past days – seen as a signal the cost of borrowing will have to go up to protect the pound and keep a lid on inflation.
“It is hard not to draw the conclusion that all this will require significant monetary policy response,” Pill said in a speech to the Barclays-CEPR International Monetary Policy Forum.
“We must be confident in the stability of the UK’s economic framework.”
Craig Erlam, senior market analyst at OANDA, said: “It appears everyone is unusually united in their objection to the Treasury’s tax-cutting plans at a time when inflation is almost 10% and rising.
“It’s no surprise then to see sterling plummet once more alongside Kwasi Kwarteng and Liz Truss’s credibility on the world stage. Not the best start to life in Downing Street.”
After two days of big changes, the pound settled down on Tuesday, trading at around 1.08 dollars for most of the day, deviating only briefly with a two cent drop.
