The British Truss is trying to calm the economic plan

  • PM defends economic plan and says it’s right
  • Also tries to calm party, public
  • Says Kwarteng made a decision about a high tax rate

BIRMINGHAM, England (Reuters) – Britain’s Prime Minister Liz Truss on Sunday tried to reassure her party and the public by saying she should have done more to ‘prepare the ground for an economic plan’ that lifted the pound Dropped record lows and government borrowing costs soared.

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

She defended her “growth plan,” a package of tax cuts that has been criticized by investors and many economists for calling for billions of dollars in spending while providing few details on how it would be paid for in the short term.

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Truss said it was the right direction, suggesting critics failed to see the depth of Britain’s troubles and that she should have done more to explain them – an argument market traders and investors have cited as the reason behind the pound’s decline and of the pound have rejected increases in borrowing costs last week.

But what some Conservative lawmakers fear will hurt her prospects in a 2024 election, she didn’t deny that the plan would require spending cuts on public services and refused to commit to increasing welfare payments in line with inflation while to advocate a tax cut the richest.

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

“I stand by the package that we announced and I stand by the fact that we announced it quickly because we had to act, but I accept that we should have prepared the ground better.”

Jake Berry, leader of the Conservative Party, suggested markets may have overreacted but admitted he was no economist. “So let’s see where the markets are in six months,” he told Sky News.

TROUBLE AHEAD?

Truss took office on September 6, but Queen Elizabeth died two days later, and so the first few days of the new PM’s tenure were largely taken up with the national period of mourning, when politics were virtually on hold.

She launched her plan two weeks after taking office as her team felt she signaled her plans during a leadership campaign against rival Rishi Sunak, who had opposed immediate tax cuts.

But the scale of the unfunded cuts spooked markets. After a major sell-off, the pound has recovered following intervention by the UK’s central bank, the Bank of England, but government borrowing costs remain significantly higher.

Investors say the government needs to work hard to restore confidence and the BoE emergency round of asset purchases is only set to run until October 14, giving Truss little time.

Aside from the market reaction, Truss’s economic plan also raised alarm in the Conservative Party, particularly over the elimination of the top 45% income tax.

Some in the party fear they risk being seen as “the evil party,” cutting taxes on the wealthiest while doing little to improve the lives of the weakest.

In what could be a sign for the future, Business Secretary Jacob Rees-Mogg was snubbed by a dozen protesters who chanted “Not welcome here” as he arrived at the conference centre. He had to be escorted by the police.

A former minister, Michael Gove, who has long been at the heart of government, also criticized the party’s plans to abolish the top rate tax and suggested he could vote against it, and Andy Street, the Conservative mayor of Birmingham, said he would have not done made this policy.

“It’s going to be very, very difficult to argue that if we cut taxes on the wealthiest, it’s okay to cut welfare,” Gove said at an event at the conference.

Truss argued the move was part of simplifying the tax system, but added that the decision on the top tax was made by her finance minister, Kwasi Kwarteng.

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

She also pointed out that politicians spend too much time worrying about how their policies will be received by the public and said she is focused on driving growth. Truss has said many times that she is not afraid of unpopular decisions.

But she struggled to answer whether removing some taxes would have to be paid for with cuts in public services. Rather than deny it, she said she wanted the best possible services that offer taxpayers good value for money.

“I will ensure that we get value for money for the taxpayer, but I am very committed to ensuring that we have excellent public services on the front lines.”

Continue reading:

How the Bank of England threw a lifeline to the markets

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Reporting by Elizabeth Piper and Andrew MacAskill; Additional reporting by Hannah McKay; Edited by Gareth Jones, Frances Kerry and Jan Harvey

Our standards: The Thomson Reuters Trust Principles.

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