UK not gambling on growth - but it will pay for spending, minister says

·2-min read
Downing Street, in London

By Andy Bruce and William James

LONDON (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)