Liz Truss, Prime Minister, has admitted mistakes were made in the controversial ‘mini’ budget that sparked market turmoil last week as she prepared for a tense Conservatives conference in Birmingham.
Truss said she would support her plan to buy $45 billion in unfunded tax cuts.
The Prime Minister has repeatedly refused to say whether she would cut public spending to make the totals add up, saying she needs to work to win “the hearts and minds” of Tory MPs to convince them that her plan is right.
She also conceded that the controversial plan to abolish the 45 per cent top rate of income tax paid on earnings over £150,000 was not discussed by Cabinet. “It was the Chancellor’s decision,” she told the BBC.
The plan sparked fears of higher inflation, causing the pound to fall to record lows against the dollar and UK government bonds to sell off. Lenders withdrew thousands of mortgage products and the Bank of England launched a £65 billion bond-buying program to stabilize markets.
Truss and her Chancellor Kwasi Kwarteng have been heavily criticized by Tory MPs over their plan and on Sunday former Cabinet Secretary Michael Gove said he had “deep” concerns about it.
Speaking of Sunday with Laura Kuenssberg programme, Gove said that borrowing heavily to pay for tax cuts was “not conservative” and declined to say whether he would vote for the package.
Gove, who will appear at a number of events at the Tory conference, said the decision to scrap the 45 per cent rate and lift the bonus cap for bankers amid a livelihood crisis showed “the wrong values”.
Gove’s comments spell trouble for the Prime Minister and echo what many Tory MPs have said in private. Some believe that if they don’t get a grip on themselves quickly, Kwarteng or Truss — or both — will have to go.
Truss arrived in Birmingham with the Conservatives trailing Labor by between 20 and 33 points according to multiple polls and MPs in a state of high jitters as mortgage rates soar after the financial report.
The Prime Minister was defiant on Sunday, insisting the tax cuts and a raft of supply-side reforms in areas such as planning, City of London regulation and immigration would boost growth.
She refused to say whether she needed to start a new round of austerity, saying only that she wanted to provide “great public service” and that people were too focused on “inputs, not outcomes”.
But many Conservative MPs fear a major public backlash if welfare cuts are cut in real terms while the Truss government cuts taxes on the wealthy.
Truss said Chloe Smith, Secretary of Works and Pensions, will make a decision on increasing benefits in the autumn. But the Prime Minister confirmed that pensions would rise in line with inflation.
Her admission that the financial plans could have been explained better will add to the tensions that have been building between the Prime Minister and Kwarteng in recent days.
But she initially defended the chancellor’s decision to attend a private reception with hedge fund managers in the Sunday Timeson the evening of its financial report on September 23. “The chancellor meets with businessmen all the time,” she said.
Some Conservative MPs have already started speculating on the possibility that Truss could be replaced by her rival Rishi Sunak, who is spending a conference week in his North Yorkshire constituency.
Truss’ admission that she needs to win “hearts and minds” in her party is also a nod to the problems she may face trying to get legislation through the House of Commons to implement her plans.
https://www.ft.com/content/692d9c5a-352e-4008-9961-4fcec0f5584f Liz Truss admits mistakes but sticks to controversial tax cut plan