The Malta Independent 26 November 2022, Saturday
View E-Paper

UK's Truss vows to listen as she reels from policy U-turns

Associated Press Tuesday, 4 October 2022, 11:58 Last update: about 3 months ago

British Prime Minister Liz Truss has insisted she is leading “a listening government” that learns from its mistakes, as she tries to restore her shaky authority and reassure financial markets spooked by her government’s see-sawing economic pledges.

Truss told the BBC in an interview broadcast Tuesday that she and her ministers were determined to “reflect on how we could have done things better.”

“Is everything the government (has) done absolutely perfect? No it’s not,” she said. “I fully acknowledge that. And we have learned from the feedback we’ve received.”

ADVERTISEMENT

That “feedback” has been dramatic: Truss’ four weeks in office have seen the pound plunge to record lows against the dollar, the Bank of England take emergency action and the opposition Labour Party surge to record highs against her Conservatives in opinion polls.

Now Truss also faces a battle with her party over her economic plans, with some lawmakers warning they will oppose any attempt to slash welfare benefits to help pay for lower taxes.

Truss is on a mission to reshape Britain’s economy through tax cuts and deregulation in a bid to end years of sluggish growth. But she is trying to ride out a series of U-turns over her first big policy: a stimulus package that includes 45 billion pounds ($50 billion) in tax cuts, to be paid for by government borrowing. Its announcement on Sept 23 sent the pound tumbling to a record low against the dollar and increased the cost of government borrowing.

The Bank of England was forced to intervene to prop up the bond market and stop a wider economic crisis. Fears that the bank will soon hike interest rates caused mortgage lenders to withdraw their cheapest deals, causing turmoil for homebuyers.

Under political and financial pressure, the government on Monday scrapped the most unpopular part of its budget package, a tax cut on earnings above 150,000 pounds ($167,000) a year. That saves about 2 billion pounds, a small share of the government’s 45 billion-pound tax-cutting plan — and it’s unclear how the rest will be paid for.

Treasury chief Kwasi Kwarteng has also promised to publish a fully costed fiscal plan, alongside an economic forecast from the independent Office for Budget Responsibility. Initially that was due to come Nov. 23, but mounting pressure means it’s likely to arrive weeks sooner.

What Kwarteng on Monday called the “hullabaloo” over the government’s plans has cast a shadow over the Conservatives’ annual conference in the central England city of Birmingham, where many delegates express fears that the party, in power since 2010, is headed for defeat in the next election.

The party has a commanding majority in Parliament but is fractious after three years of scandal under former Prime Minister Boris Johnson, followed by a divisive leadership contest between Truss and former Treasury chief Rishi Sunak. Sunak warned during his losing campaign that Truss’ plan to fund tax cuts through borrowing would undermine both the government’s economic credibility and the nation’s finances.

Truss says her policies will bring economic growth, higher wages and eventually more tax revenue for the government to spend. But critics say the plans do little to help millions of people who are struggling right now with a cost-of-living crisis fueled by soaring energy prices.

Truss said she was “very committed to supporting the most vulnerable,” pointing to a cap on energy prices that took effect Oct. 1.

However, she refused to promise benefits and state pensions would increase in line with inflation, which has been the practice for years.

“We are going to have to make decisions about how we bring down debt as a proportion of GDP in the medium term,” Truss said. “We have to be fiscally responsible.”

Conservative lawmakers — including government ministers — warned Truss that they would oppose a real-terms cut in welfare benefits.

“I have always supported, whether it’s pensions, whether it’s our welfare system, keeping pace with inflation. It makes sense to do so,” said Penny Mordaunt, the leader of the House of Commons.

“That’s what I voted for before and so have a lot of my colleagues,” Mordaunt told Times Radio.

  • don't miss