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British PM Truss apologises for economic plan, spending cuts to come

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Tuesday, October 18th, 2022
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Reuters

Prime Minister Liz Truss has apologised for threatening Britain’s economic stability after she was forced to scrap her vast tax-cutting plans and embark on a programme of “eye-watering” public spending cuts instead.

Truss watched silently in parliament on Monday as her new finance minister Jeremy Hunt tore up the radical economic agenda the prime minister had proposed less than a month ago, and which triggered a bond market rout so deep that the Bank of England had to intervene to prevent pension funds from collapsing.

The Financial Times reported on Tuesday the central bank was now likely to delay its planned sale of billions of pounds of government bonds because markets remain too volatile.

Truss’s decision to pull her economic programme has so far eased some of the pressure on Britain’s elevated borrowing costs, but the scale of the reversal means she is now fighting to survive, just six weeks after she became prime minister.

A handful of her lawmakers have already gone public to call for her to quit.

“I do want to accept responsibility and say sorry for the mistakes that have been made,” Truss told the BBC late on Monday.

“I wanted to act to help people with their energy bills, to deal with the issue of high taxes, but we went too far and too fast.” She added that she was “sticking around”, and will later address her cabinet of senior ministers.

The Daily Mail, which had hailed Truss’s plan, ran a front page with the prime minister leaving parliament on Monday underneath the headline “In office, but not in power” while the also supportive Sun newspaper called her “The Ghost PM”.

James Heappey, a minister for the armed forces, said on Tuesday Truss, his boss, could not afford to make any more mistakes. “To her credit, she has owned it and apologised,” he told Sky News.

MARKET TURMOIL

Truss was elected by party members and not the broader electorate on a promise to slash taxes and regulation to fire up the economy in a policy that was dubbed by critics as a return to 1980s Thatcherite-style “trickle-down” economics.

But the market reaction was so dramatic that borrowing costs surged, lenders pulled mortgage offers and pension funds fell into a tailspin.

With Britain’s economic reputation shattered, Hunt may now have to go further in finding public spending cuts than the government would have done had Truss not unleashed her economic plan at a time of surging inflation.

One area of spending already to go is Truss’s vast two-year energy support package that was expected to cost well over 100 billion pounds. Hunt has said support to households and businesses will now last until April, before it is reviewed.

On Monday, he also refused to guarantee previously stated policies, such as a commitment to increase pensions in line with inflation and he has not ruled out a reduction to health spending or committed to Truss’s promise to increase defence spending.

Showing the pressures that will grow on the government as it tries to cut spending, Heappey, a junior minister, said he would quit if the government dropped its plan to increase defence spending to 3% of GDP by 2030. “There is no prosperity without security,” he told LBC Radio.

Torsten Bell, the head of the Resolution Foundation, a think tank, told BBC radio, that the government may now need to find public spending cuts of around 30 billion pounds, a task that will be made more difficult by successive Conservative governments cutting departmental budgets over the last 10 years.

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