British Prime Minister Liz Truss admitted mistakes were made with her government’s controversial “mini-budget” announced last week – which sent the pound to historic lows and sparked market chaos – but stood by her policy.
Speaking to the BBC’s Laura Kuenssberg on Sunday morning, Truss said: “I accept that we should have laid the ground better and I’ve learned from that and I want to make sure I will do a better job of laying the ground in earth. future.”
She said she would “tell people that I understand their concerns about what happened this week and I stand by the package that we announced and I stand by the fact that we announced it quickly.”
Last week, the Truss government announced it would cut taxes by 45 billion pounds ($48 billion) in a bid to jumpstart the UK economy, with a package that includes scrapping the highest income tax for top earners from 45 % to 40% and a big increase in government borrowing to lower energy prices for millions of households and businesses this winter.
Many leading economists described the unorthodox measures as a reckless gamble, noting that the measures came a day after the Bank of England warned that the country was already likely to be in recession.
Truss said the reforms were not approved by her cabinet but were a decision made by Chancellor Kwasi Kwarteng. “It was a decision the chancellor took,” she told the BBC.
However, she doubled down on that decision, saying her government made the “right decision to borrow more this winter to address the extraordinary consequences we face,” referring to the energy crisis caused by the war in Ukraine. She claimed the alternative would be people paying up to £6,000 in energy bills and inflation would be 5% higher.
“We don’t live in a perfect world, we live in a very difficult world where governments around the world are making tough decisions,” Truss said.
Regarding the rising cost of living in the UK, namely the rise in mortgage rates, Truss said it is mostly driven by interest rates and is “a matter for the independent Bank of England.”
The Bank of England said on Wednesday it would buy UK government debt “to whatever extent is necessary” in an emergency intervention to stem a bond market crash that it warned could threaten financial stability.
Meanwhile, Credit Suisse said UK house prices could “easily” fall between 10% and 15% over the next 18 months if the Bank of England aggressively raises interest rates to keep inflation in check.
The fallout could make it harder for people to get approved for mortgages and encourage potential buyers to delay their purchases. A fall in demand will lead to falling prices.
Truss defended his government’s policy to the BBC as the Conservative Party’s annual conference kicked off in Birmingham.
The party is bitterly divided and its opinion polls are sinking lower than they were even under Boris Johnson’s disgraced leadership.
On Sunday, the chill was evident when Nadine Dorries, the former culture secretary who backed Truss to become prime minister, accused Truss of throwing Chancellor Kwasi Kwarteng “under a bus” in her BBC interview when she said the tax cut decision was made. by him and not the government.
“One of @BorisJohnson’s faults was that he could sometimes be too loyal and he got that. But there is a balance and throwing your chancellor under a bus on the first day of conference really isn’t. [Hope] things are improving and settling down from now on,” Dorries said on Twitter.
Conservative MPs fear the combination of tax cuts, along with huge public spending to help people cope with energy bills, rising inflation, rising interest rates and a falling pound will make it impossible to win the next general election.