Mishandled tax-cut announcement, acknowledges British PM Liz Truss

Traders drove to the pound to a record low in the aftermath of Kwarteng's fiscal statement, govt borrowing costs soared and the Bank of England to intervene to prevent a meltdown in the gilt market

Liz Truss acknowledged her UK government mishandled the announcement on unfunded tax cuts which triggered a week of turmoil in financial markets, while insisting her approach is the correct one. She also said the decision to remove the highest rate of income tax was taken by Chancellor of the Exchequer Kwasi Kwarteng and not put to her Cabinet.

“I do accept we should have laid the ground better; I’ve learned from that,” Truss told the BBC in Birmingham, where the ruling Conservative Party’s annual conference begins Sunday. “I do stand by the package we announced.”

Traders drove to the pound to a record low in the aftermath of Kwarteng’s fiscal statement, government borrowing costs soared and the Bank of England to intervene to prevent a meltdown in the gilt market.

Amid the fallout, support for the Tories has tanked in opinion polls, with YouGov putting the opposition Labour Party 33 points ahead. A survey by Opinium for the Observer newspaper showed three-quarters of UK voters, including 71 per cent of those who backed the Tories in the last election, believe Truss and Kwarteng have “lost control” of the economy. 

Cutting taxes for Britain’s highest earners is proving especially toxic, given ministers have also indicated that the government’s plans will require department to find cost-savings. That has angered Tory MPs, who fear it plays into the hands of Keir Starmer’s Labour.

“I believe in getting value for money for the taxpayer,” Truss said. She said she would ensure state pension payments rise in line with inflation, but refused to make the same commitment for welfare benefits and department spending.

Her comment that it was Kwarteng’s decision to remove the top rate of income tax is the first sign Truss may be trying to distance herself from her chancellor — though she also reiterated the government is sticking with the policy.

That sets up a major row with Conservative MPs at this week’s conference and when Parliament returns next week. “There is inadequate realisation at the top of government at the scale of change that is required,” former Cabinet Minister Michael Gove told the BBC after Truss’s interview. Gove indicated that he would not support the tax cuts when the issue is put to lawmakers.

Labour’s economy spokeswoman, Rachel Reeves, said many people will not be able to cope with mortgage rate increases as a result of the government’s policies. “This is a crisis made in Downing Street but it’s ordinary working people who are paying the price,” she said.