LONDON — On Thursday, British Prime Minister Liz Truss defended her economic plan and shrugged off the backlash from financial markets, saying she was ready to make “tough decisions” to grow the economy.
In his first public comments since the government’s announcement of billions of dollars in unquantified tax cuts shook markets and drove the pound to record highs, Truss said Britain faced “a very, very difficult economic times.” But she said the problems were global and driven by Russia. invasion of Ukraine.
She spoke after the Bank of England took emergency action on Wednesday to stabilize Britain’s financial markets and avert a crisis in the wider economy after the government scared off investors with a cuts package unfunded taxes, driving down the pound and driving up the cost of public debt.
Truss told local BBC radio that ‘we needed to take urgent action to grow our economy, get Britain moving and also deal with inflation’.
“Of course, many measures that we have announced will not happen overnight. We’re not going to see growth happen overnight,” she said. “What’s important is that we put this country on a better long-term trajectory.”
In a series of interviews, Truss said his government’s decision to cap household and business energy bills would help bring inflation under control and help millions of people facing a cost of living crisis.
But it was not this decision that alarmed the markets. It was the government’s announcement on Friday of an economic stimulus package that included 45 billion pounds ($48 billion) in tax cuts and no spending cuts – without an independent economic assessment of the cost and impact.
The Bank of England warned that eroding confidence in the economy posed a “significant risk to the UK’s financial stability” and said it would buy long-term government bonds over the next few months. next two weeks to combat a recent decline in UK financial assets.
Former bank governor Mark Carney said the government and the central bank appeared to be pulling in different directions.
“Unfortunately, having a partial budget, under these circumstances – difficult global economy, difficult position in financial markets, working against the grain with the Bank – has led to some pretty dramatic moves in financial markets,” he said. told the BBC.
The pound was trading around $1.08 on Thursday, above its record low of $1.0373 on Monday. It has lost some 4% of its value since Friday.