Longest-running locally produced podcast, International Tax Bites, interviews former Chancellor, Kwasi Kwarteng, on its 5th Anniversary.

The longest-running locally produced podcast, International Tax Bites, has marked its fifth anniversary with a high-profile interview featuring former Chancellor Kwasi Kwarteng. The podcast is hosted by Grahame Jackson, Partner at Hassans, and co-host Harriet Brown, Barrister at Old Square Tax Chambers.

In a wide-ranging interview, Kwasi called for sweeping reform of the UK’s fiscal watchdog, arguing that the Office for Budget Responsibility has become “totemic” and risks constraining elected governments with a narrow and “static” view of the economy.

Kwarteng said the OBR’s methodology amounted to “abacus economics”, insufficiently accounting for behavioural and dynamic effects of tax policy. He suggested the watchdog should present alternative economic scenarios rather than a single forecast that “marks the government’s homework”.

“The OBR has become a comfort blanket for markets,” he said, reflecting on the market turmoil that followed the September 2022 “growth plan” under then-prime minister Liz Truss. “We underestimated how much markets relied on it.”

Kwarteng acknowledged that the decision not to publish an OBR forecast alongside the mini-Budget contributed to investor unease. But he maintained that the objectives underpinning the package - boosting growth and lowering the tax burden - were “the right ones”, even if the sequencing proved politically and financially unsustainable.

“The pace and sequencing were wrong,” he said, noting that a generous energy price intervention followed immediately by large tax cuts “looked incoherent”.

Warning on tax and spending trajectory

The former chancellor was sharply critical of the current fiscal direction, warning that rising public expenditure and what he described as repeated tax increases risk choking off growth.

He cited government spending rising from roughly £700bn in 2010 to more than £1tn after the pandemic, and national debt swelling from about £520bn in the mid-2000s to around £2.5tn. “The state is not delivering proportionally more value,” he said.

Kwarteng argued that the political framing of tax as a moral obligation to make the wealthy pay their “fair share” reflected deeper structural pressures: weaker growth since the 2008 financial crisis and the expanding costs of the welfare state.

“When growth is low and welfare commitments are rising, governments become anxious to extract more revenue,” he said. Fiscal drag - freezing or lowering thresholds - functions as a “stealth tax”, he added, pulling more earners into higher bands without headline rate increases.

He described the present Labour government as “further left than the Blair era”, and the party as more left wing than at any time since the early 1980s, claiming recent Budgets raising tens of billions of pounds in additional revenue were directed primarily towards welfare spending rather than growth-enhancing investment.

A broader critique of fiscal orthodoxy

Drawing on his academic work on the 17th-century Recoinage Crisis and the fiscal strains of wartime Britain, Kwarteng returned repeatedly to the dangers of what he termed “fiscal incontinence”.

From Rome to modern fiat currencies, he argued, excess spending leads to monetary debasement, whether by reducing the silver content of coins or by expanding the money supply. In the modern era, he suggested, the welfare state exerts a pressure on public finances analogous to that of war in earlier centuries.

He was sceptical of modern monetary theory, warning against “excessive faith” in governments’ ability to create money without consequence.

Lessons from the mini-Budget

Kwarteng said that any future tax-cutting agenda must be paired explicitly with credible spending reductions to retain market confidence. “Tax cuts without spending cuts are incomplete,” he said.

Among policies he continues to back are revisiting the IR35 off-payroll working rules and reinstating VAT-free shopping for tourists, arguing that behavioural effects and wider economic benefits could offset modest revenue losses.

He also defended elements of the 2022 growth plan that survived in modified form, including reversing the national insurance increase linked to the health and social care levy and making the £1mn annual investment allowance permanent.

While accepting that his tenure as chancellor lasted just 38 days, Kwarteng rejected the idea that the episode invalidated the broader case for supply-side reform.

“The objectives were right,” he said. “But you have to carry markets and institutions with you.”

International Tax Bites

Launched in 2021 by Grahame Jackson and Harriet Brown, International Tax Bites now reaches listeners in more than 140 countries, exploring key developments and issues in international taxation. The anniversary episode, along with the full archive, is available on Apple, Spotify and all major podcast platforms.            

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