Labour accuses Kwasi Kwarteng of ‘fanning flames’ of falling pound

Chancellor Kwasi Kwarteng “fanned the flames” of the plummeting pound by hinting at fresh “unfunded” tax cuts, his Labour shadow has said after sterling hit an all-time low against the dollar.

Rachel Reeves accused ministers of recklessly gambling with the nation’s finances and of spooking the markets with the “scale” of Government borrowing to pay for measures including axing the top rate of income tax.

The pound fell to the lowest level against the US dollar since decimalisation in 1971, dropping by more than 4% to just 1.03 dollars before gaining some ground as trading picked up on Monday.

Market confidence in new Prime Minister Liz Truss’s economic plans was driving the falling value of sterling, which could lead to imports to the UK such as oil and food further increasing.

Over the weekend Mr Kwarteng sought to brush off questions about the markets’ reaction to the biggest programme of tax cuts for 50 years, which he announced on Friday, and even said there is “more to come”.

Talking from the Labour conference in Liverpool, Ms Reeves told BBC Radio 4’s Today programme: “It is incredibly concerning.

“I think many people had hoped over the weekend things would calm down but I do think the Chancellor sort of fanned the flames on Sunday in suggesting there may be more stimulus, more unfunded tax cuts, which has resulted overnight in the pound falling to an all-time low against the dollar.”

The shadow chancellor doubled down on her comparison of Mr Kwarteng and the prime minister to “two gamblers in a casino chasing a losing run” and warned they are betting with the nation’s finances.

“Here’s the thing, they’re not gambling their money, they’re gambling all of our money, that’s why it’s irresponsible and reckless as well as being grossly unfair,” Ms Reeves said.

Sir Keir Starmer was also blaming the Tory Government for the “real turmoil” in the financial markets, while speaking at a Bloomberg business event.

Although the Labour leader said his party would reverse the abolition of the 45% tax rate on earnings above £150,000, he has backed the reduction of the basic rate to 19p in the pound.

Ms Reeves suggested Labour would pay for the tax cut with borrowing, warning it was just the scale of the Government’s borrowing that had “spooked the markets”.

“When I set out my fiscal rules last year I said that in emergency situations – and we are absolutely in a national emergency at the moment – you can borrow and the Government is borrowing, it’s the scale of the borrowing…” she said.

Ms Reeves was preparing to use her party conference speech to announce that a Labour government would create a state-owned investment fund to back projects which could generate wealth for the nation.

The fund would begin with an initial £8.3 billion investment to fund green industries.

Ms Reeves has the main speech at the gathering on Monday, but party leader Sir Keir Starmer will also appear at the conference alongside former England footballer Gary Neville.

The former Manchester United defender Neville used a Daily Mirror interview to brand the tax cuts announced by Mr Kwarteng “immoral” and “madness”.

The Sky Sports pundit said Ms Truss was “taking the absolute mickey out of us” by cutting taxes for the wealthy and declared that having Sir Keir as prime minister would be “a change that cannot come quick enough”.

Ms Reeves’ keynote speech at noon will be a chance for Labour to set out an alternative economic course to Mr Kwarteng’s.

The creation of the national wealth fund could be modelled on similar institutions in countries like Norway and Singapore, and its aim is to create long-term wealth for Britain.

Labour wants to target the money at industries where public investment could attract further private sector spending to deliver energy security and a zero-carbon economy.

The projects include eight new battery factories, six clean steel plants, nine renewable-ready ports, the world’s largest hydrogen electrolyser plant and net-zero industrial clusters in every region of the country.

The party would also establish an Industrial Strategy Council (ISC) to scrutinise progress in meeting policy commitments, in the same way the Climate Change Committee monitors governments’ actions in meeting environmental goals.

It would examine progress against four pledges: delivering clean power by 2030, harnessing data for public good, caring for the future and building a resilient economy.