Kwasi Kwarteng has today told City chiefs that short-term UK borrowing must increase to pay for a £100bn+ energy package, but that “fiscal discipline” will return soon.
The new chancellor said in a meeting with financial services executives that the government is “committed to taking decisive action to help the British people now”, but that it will pursue an “unashamedly pro-growth agenda” that will involve radical economic reforms.
Prime Minister Liz Truss and Kwarteng will unveil an expected £140bn plan tomorrow to curb energy costs for households and businesses this winter.
Truss is refusing to levy a further windfall tax on North Sea oil and gas to pay for the package and will instead increase the UK’s debt pile.
A Treasury spokesperson said Kwarteng told financial services bosses that the support packages “will mean necessary higher borrowing in the short-term whilst ensuring monetary stability and fiscal discipline over the medium term”.
“In an official statement, Kwarteng said: “We face extraordinary economic challenges in the coming weeks and months and I know that families and businesses across the UK are worried.”
In a bid to calm markets, Kwarteng added: “We need to be decisive and do things differently. That means relentlessly focusing on how we unlock business investment and grow the size of the British economy, rather than how we redistribute what’s left.”
Truss also spent parts of the campaign calling for the Bank’s mandate to be changed in the wake of claims from her camp that its £450bn Covid Quantitative Easing programme fuelled inflation.
Her supporters have also said Truss is in favour of new rules that will allow ministers to overrule regulatory decisions on financial services made by the Bank of England.
These comments had worried Bank chiefs about the Old Lady’s independence from government.
However, Kwarteng today tried to assure the City chiefs that Truss was in support of the central bank’s independence.
A spokesperson for the Kwarteng said: “The chancellor also reiterated his full support for the independent Bank of England and their mission to control inflation, which is central to tacking cost of living challenges.”