Liz Truss has said she should have “laid the ground better” for her package of debt-funded tax cuts as she refused to rule out public spending cuts.
The Prime Minister said “I have learnt from that and I will make sure in the future we will do a better job of laying the ground”, after the package caused market turmoil this week, but that her plans to slash taxes were the right ones.
The fiscal statement led to a large sell-off of UK Treasury bonds, sending yields on the gilts soaring, and a slump in the value of the pound against the US dollar.
The pound has since recovered in reaction to the Bank of England’s decision to spend £65bn in stabilising the UK’s bond market.
City figures have said the government will need to outline how it will get the Budget back into surplus, and therefore pay back the national debt, with spending cuts expected.
Conservative party chair Jake Berry today said the government must “manage expenditure” in the same way households need to manage their budgets in the latest indiscation Kwasi Kwarteng will cut spending.
It has been widely speculated that cuts will come through breaking Boris Johnson’s previous policy to keep benefits rising in line with inflation.
The Prime Minister refused to rule out a cut in spending six times during a BBC interview on the first day of this year’s Conservative conference.
“What I’m going to do is make sure we get value for money for the taxpayer, but I’m very committed to making sure we have excellent frontline public services,” she said.
“I will make sure we always protect the most vulnerable in all the decisions we make.
“I’m not going to come on here and make financial statements, that’s a matter for the chancellor. We will know in due course what will happen with benefits.”
Truss and Kwarteng’s mini-Budget included an abolition of the top 45p rate of Income Tax, a reversal of this year’s National Insurance rise and a plan to bring forward the 1p cut to the basic rate of Income Tax forward to 2023.
Truss revealed today that Kwarteng had not informed cabinet about the cut to the top rate of Income Tax before it was announced.
Former cabinet minister Michael Gove said today that he was “profoundly” concerned about Truss’ economic policies and that they were a “display of the wrong values”.
He called for large parts of the recent fiscal statement to be changed.
“There are two things that are problematic, two major things that were problematic,” he said.
“The first is the sheer risk of using borrowed money to fund tax cuts. That is not conservative.
“The second thing is to cut the 45 pence tax rate and at the same time to change the law which governs how bankers are paid in the City of London.”