UK government says no spending cuts, no reversal of tax cuts

LONDON – Britain’s new government said Wednesday it will not cut taxes or cut public spending as it seeks to stand firm in the face of further turmoil in financial markets and changes in economic policy.

Britain’s financial markets have been under strain since Finance Minister Kwasi Kwarten last month announced £45bn (US$50bn) in tax cuts and support for an unprecedented energy bill without disclosing how they would be paid. .

The Fiscal Institute think tank says the strategy would require £62bn of spending cuts or tax increases to stop public debt from rising.

“In the medium term, we will see the debt decrease, but we will ensure that public funds are used wisely, rather than cutting public spending,” Truss told Congress.

The 47-year-old former foreign secretary, who was elected last month by party members rather than broad voters, pledged to pull the economy out of years of stagnation through some reforms to the economy, such as tax cuts and plans. moving and raising children.

But markets were horrified by tax cuts and criticism of the government’s previous “Treasury legitimacy”, pushing up borrowing costs and mortgage rates, forcing the Bank of England to step in and buy long-term government bonds.

Earlier, Truss’ business secretary said the government was still working on economic reforms after The Times reported that it was struggling to come to terms with new policies.

no regrets

Borrowing costs rose again on Wednesday after Bank of England Governor Andrew Bailey said market support would end on Friday, and the Truss was asked if it would remain committed to its previous pledge to maintain spending levels. “Never, never,” she said in Congress.

Her junior finance minister, Chris Philp, also said the government would not reverse the tax cut plan. Her spokesman later said that while public spending would increase overall, “very difficult decisions need to be made given some of the global challenges we face”, adding that government Departments are being asked to seek efficiency savings.

Truss and Kwarteng reversed one of their plans to abolish top income tax rates. They also moved the date of his budget forward to Oct. 31, including details of financial projections.

Mel Stride, chairman of Congress’ Treasury Select Committee and a supporter of Rishi Snacks, a rival to the Truss’ leadership, said that given its commitment to protecting public spending, it would be a good idea to keep the market happy. said more policy changes may be needed.

Their economic approach has alienated some of the ruling Conservative Party, but many support the prime minister and the recession will undermine their hopes of winning the next election expected in 2024. claims to be deaf. The Republican leader told Reuters he didn’t buy into the need to cut spending that much or the idea that a recession was a price worth paying to keep inflation down.