UK’s Truss tries to reassure over economic plan

  • Defends economic plan and says it’s right
  • Also try to reassure
  • Says Kwarteng has decided on a high tax rate?

BIRMINGHAM, England, Oct. 2 (Reuters) – British Prime Minister Liz Truss tried to reassure her party and the public on Sunday by saying she should have done more to “lay the groundwork” for an economic plan that will push the pound to record lows fell and the cost of government borrowing rose.

On the first day of her ruling Conservative Party’s annual conference, Truss, who had been in office for less than a month, took a softer tone by saying she would support the public through a difficult winter and beyond.

She defended her “growth plan,” a package of tax cuts that investors and many economists have criticized for spending billions of pounds while giving little detail about how it would be paid in the short term.

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Truss said it was on the right track, suggesting critics failed to realize the depth of Britain’s problems and should have done more to explain them – an argument that market traders and investors have dismissed as a reason for the decline. of the pound and the rise in borrowing costs last week.

But in what some conservative lawmakers fear will hurt their prospects in a 2024 election, she did not deny that the plan would lead to cuts to public services and declined to commit to increasing social benefits in line with inflation. while getting a tax cut for the richest.

“I understand their concerns about what happened this week,” she told the BBC in the central English city of Birmingham.

“I support the package we announced, and I support the fact that we announced it quickly because we had to act, but I do accept that we should have laid the foundation better.”

Conservative Party chairman Jake Berry suggested the markets may have overreacted, while admitting he was not an economist. “So let’s see where the markets are in six months,” he told Sky News.

PROBLEMS IN SIGHT?

Truss took office on September 6, but Queen Elizabeth died two days later and so the first days of the new prime minister’s term were largely taken up by national mourning, when politics virtually came to a standstill.

She launched her plan two weeks after taking office, feeling that her team had signaled her plans during a leadership campaign against rival Rishi Sunak, who had argued against immediate tax cuts.

But the scale of the plan scared the markets. After a major sell-off, the pound has since recovered after Britain’s central bank, the Bank of England, intervened, but government borrowing costs remain significantly higher. Investors say the government will have to work hard to restore confidence.

Aside from the market reaction, Truss’s economic plan has also raised alarms among the Conservative Party, particularly over the abolition of the top 45% income tax rate.

Some in the party fear they risk being seen as “the nasty party”, cutting taxes on the rich while doing little to improve the lives of the most vulnerable.

A former minister, Michael Gove, who has long been at the heart of the government, hinted that he would not vote to abolish the top tax when the economic plan goes into parliament and Andy Street, Birmingham’s conservative mayor, said he wouldn’t have made that policy.

Truss said she supported the simplification of the tax system, but added that the decision on the highest tax was taken by her finance minister, Kwasi Kwarteng.

When asked if all of her cabinet of top ministers had been informed in advance, Truss said: “No, we didn’t, this was a decision by the chancellor.”

She also suggested that politicians spent too much time worrying about how their policies were received by the public, saying she was focused on driving growth. Truss has often said that she is not afraid to make unpopular decisions.

“I think there’s been too much focus in politics on optics or how things look,” she said.

But she struggled when pressured to answer whether cutting some taxes should be paid for through cuts to public services. Instead of denying this, she said she wanted the best possible services that offer taxpayers value for money.

“I’m going to make sure we get value for money for the taxpayer, but I’m very, very committed to making sure we have excellent frontline public services.”

Read further:

How the Bank of England rescued the markets

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Reporting by Elizabeth Piper and Andrew MacAskill Editing by Gareth Jones and Frances Kerry

Our Standards: The Thomson Reuters Trust Principles.

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