UK Prime Minister Liz Truss on Thursday defended her tax cutting policy after days of silence during which markets tanked and the Bank of England was forced into an emergency intervention.
“We had to take urgent action to get our economy growing, get Britain moving, and also deal with inflation,” she said in a round of local BBC radio interviews. “And of course, that means taking controversial and difficult decisions, but I’m prepared to do that as prime minister,” she said in her first comments to UK media since the crisis sparked by Friday’s “mini-budget”.
“It’s important the United Kingdom’s on the front foot, that we are pulling all the levers we can to drive economic growth. That is what we are pushing ahead with.”
In power for less than a month, Truss is already under severe pressure after the markets reacted to her government’s tax cuts by sending the pound to an all-time low against the dollar.
UK markets remain highly volatile, with the central bank intervening on Wednesday to buy government bonds in order to prevent a “material risk” to stability.
The Bank of England announced a two-week programme to buy long-term UK bonds, capped initially at £65 billion ($71 billion), as UK pension funds scrambled to sell investments in order to remain solvent.
After sterling hit its dollar low early Monday, the bank said it would “not hesitate to change interest rates by as much as needed” to curb high inflation. But it also signalled that it would wait until its next policy meeting on November 3 before fully assessing the impact of the government’s contentious plans. Opposition leaders have demanded that Truss cancel her Conservative party’s annual conference starting on Sunday and recall parliament over the crisis.
Markets are concerned that Britain cannot fund its huge spending commitments, having announced a massive fuel subsidy package alongside the tax cuts.
Truss defended her fiscal policy, which includes a cut to the top rate of income tax, arguing the UK currently had its highest tax burden in 70 years. “We’ve reduced those taxes across the board. And of course people who are better off tend to pay more taxes,” she said.
The pound slipped again on Thursday, while former Bank of England chief Mark Carney said the government had “undercut” financial institutions. “Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross-purposes with the bank — has led to quite dramatic moves in financial markets,” he told the BBC.