Kwasi Kwarteng tells Tory faithful 'what a day' after backtracking on tax plan


Paul Carey
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Chancellor Kwasi Kwarteng said the UK government has a plan to “get Britain moving” in a speech to Conservatives on Monday aimed at restoring his authority, hours after backtracking on a key proposal to cut taxes for the country's highest earners.

Addressing the audience in Birmingham, he acknowledged it had been a “tough” day but promised there would be no more distractions.

Downing Street said Prime Minister Liz Truss — who was in the audience for the speech — continues to have confidence in Mr Kwarteng, despite him admitting there was “humiliation” in the change of policy. The reversal was widely considered a desperate bid to avert a Tory rebellion over the strategy.

Mr Kwarteng told activists: “What a day. It has been tough but we need to focus on the job in hand.

“We need to move forward, no more distractions, we have a plan and we need to get on and deliver it.”

He added: “I know the plan has caused a little turbulence,” then repeated a phrase he used when first announcing the about face: “I get it. We’ve listened.”

Mr Kwarteng was delivering a speech that could define his political career, trying to win over the Tory faithful after his catastrophic first step as chancellor sent the pound plummeting and rattled the FTSE, handed the opposition Labour party a 33-point poll lead, outraged voters and MPs, and led one senior Tory to suggest Ms Truss should call a general election.

The pound had surged higher in overnight trading into Monday as reports surfaced that the government would drop the decision, and then remained steady throughout the day.

Sterling hit $1.13, matching levels before the mini-budget.

The market turmoil following Mr Kwarteng’s mini-budget had pushed the pound to an record low of $1.03.

The blue-chip FTSE 100 and the FTSE 250 mid-cap indexes rose 0.2 per cent and 0.7 per cent, respectively, on Monday.

Early on Monday, he performed a screeching about face by shelving the plan to abolish the top rate of tax.

Mr Kwarteng acknowledged that the desire to scrap the 45 per cent tax rate on earnings of more than £150,000 ($168,014) in a move to be paid for by borrowing had become “a distraction” and a source of widespread criticism.

Hours later, Mr Kwarteng used his speech to defend the government’s plan to cut taxes in the search for economic growth.

The chancellor is still committed to taking 1p off the basic rate of income tax, reversing April’s increase in national insurance and scrapping the planned increase in corporation tax.

He told the conference: “While we all believe in growth, we as Conservatives also believe that it is an important principle that people should keep more of the money they earn.

“I don’t need to tell you that. That isn’t radical, that isn’t irresponsible. It is a deeply held belief that we all share as Conservatives.”

The about-turn came fewer than 24 hours after Ms Truss said in a television interview that she resolved to stick to the policy, but acknowledged it could have been communicated better. She also said she had not discussed the plan with the rest of her Cabinet.

The government had resisted backing down in the face of criticism from the International Monetary Fund and a £65 billion emergency intervention by the Bank of England to restore order.

However, the prime minister and chancellor had been under growing pressure, including from senior Tory MPs, to back down.

As the Conservative Party conference began in Birmingham on Sunday, some Tories publicly voiced their concerns.

Former Cabinet members Michael Gove and Grant Shapps, who had supported Rishi Sunak in the recent leadership race, expressed their opposition to the cut, calling it “tin-eared” as it benefited the richest at time when lower earners were facing increased bills.

They said Ms Truss would struggle to get the policy through Parliament.

On Monday morning, Mr Kwarteng tweeted: “From supporting British business to lowering the tax burden for the lowest paid, our growth plan sets out a new approach to build a more prosperous economy. However, it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.

“As a result, I'm announcing we are not proceeding with the abolition of the 45p tax rate. We get it and we have listened.

“This will allow us to focus on delivering the major parts of our growth package.”

Ms Truss retweeted the chancellor’s message, reiterating that they had heard people’s concerns and were determined to focus on building a high-growth economy.

On Monday, Mr Shapps said the decision to abandon the plan was sensible and inevitable.

He was on air on BBC Breakfast when Mr Kwarteng confirmed the decision and on hearing the statement said: “Those are exactly the right words. I actually saw him last night. I encouraged him to say, ‘look we understand, we get this, sometimes you just get things wrong’.

“This was a mini-budget which was done incredibly quickly … I’m very pleased to see him acknowledging that they understood it was the wrong move and fixing that problem.”

Mr Shapps tweeted that he “strongly welcomed” the scrapping of the plan, calling the decision “sensible and pragmatic”.

“Conservatives want lower tax, but let's show our energy price cap and other policies are on [the]side of consumers rather than borrowing to cut high earner taxes first,” he said in a tweet.

Former Cabinet minister Nadine Dorries went as far as to suggest a general election should be called amid Tory party infighting.

Ms Dorries, a staunch ally of Boris Johnson, said there was “widespread dismay” at Ms Truss for ditching key parts of her predecessor’s administration’s agenda, saying three years of work “has effectively been put on hold”.

“No one asked for this,” she tweeted. “C4 [Channel 4] sale, online safety, BBC licence fee review, all signed off by Cabinet all ready to go, all stopped.

“If Liz wants a whole new mandate, she must take to the country.”

Conservative Party conference — in pictures

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Tearful appearance

Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday. 

Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow. 

She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.

A spokesman said her upset demeanour was due to a personal matter.

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Citizenship-by-investment programmes

United Kingdom

The UK offers three programmes for residency. The UK Overseas Business Representative Visa lets you open an overseas branch office of your existing company in the country at no extra investment. For the UK Tier 1 Innovator Visa, you are required to invest £50,000 (Dh238,000) into a business. You can also get a UK Tier 1 Investor Visa if you invest £2 million, £5m or £10m (the higher the investment, the sooner you obtain your permanent residency).

All UK residency visas get approved in 90 to 120 days and are valid for 3 years. After 3 years, the applicant can apply for extension of another 2 years. Once they have lived in the UK for a minimum of 6 months every year, they are eligible to apply for permanent residency (called Indefinite Leave to Remain). After one year of ILR, the applicant can apply for UK passport.

The Caribbean

Depending on the country, the investment amount starts from $100,000 (Dh367,250) and can go up to $400,000 in real estate. From the date of purchase, it will take between four to five months to receive a passport. 

Portugal

The investment amount ranges from €350,000 to €500,000 (Dh1.5m to Dh2.16m) in real estate. From the date of purchase, it will take a maximum of six months to receive a Golden Visa. Applicants can apply for permanent residency after five years and Portuguese citizenship after six years.

“Among European countries with residency programmes, Portugal has been the most popular because it offers the most cost-effective programme to eventually acquire citizenship of the European Union without ever residing in Portugal,” states Veronica Cotdemiey of Citizenship Invest.

Greece

The real estate investment threshold to acquire residency for Greece is €250,000, making it the cheapest real estate residency visa scheme in Europe. You can apply for residency in four months and citizenship after seven years.

Spain

The real estate investment threshold to acquire residency for Spain is €500,000. You can apply for permanent residency after five years and citizenship after 10 years. It is not necessary to live in Spain to retain and renew the residency visa permit.

Cyprus

Cyprus offers the quickest route to citizenship of a European country in only six months. An investment of €2m in real estate is required, making it the highest priced programme in Europe.

Malta

The Malta citizenship by investment programme is lengthy and investors are required to contribute sums as donations to the Maltese government. The applicant must either contribute at least €650,000 to the National Development & Social Fund. Spouses and children are required to contribute €25,000; unmarried children between 18 and 25 and dependent parents must contribute €50,000 each.

The second step is to make an investment in property of at least €350,000 or enter a property rental contract for at least €16,000 per annum for five years. The third step is to invest at least €150,000 in bonds or shares approved by the Maltese government to be kept for at least five years.

Candidates must commit to a minimum physical presence in Malta before citizenship is granted. While you get residency in two months, you can apply for citizenship after a year.

Egypt 

A one-year residency permit can be bought if you purchase property in Egypt worth $100,000. A three-year residency is available for those who invest $200,000 in property, and five years for those who purchase property worth $400,000.

Source: Citizenship Invest and Aqua Properties

Updated: October 03, 2022, 6:36 PM`