Liz Truss admits she could have 'laid the ground better' for UK mini-budget

British prime minister is determined to press ahead with the plans, saying it was right to borrow to cap energy prices this winter

British Prime Minister Liz Truss in the studio appearing on the BBC1 current affairs programme, 'Sunday With Laura Kuenssberg'. PA
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British Prime Minister Liz Truss said the government could have “laid the ground better” for a mini-budget that set off turmoil in the markets but she insisted she will press ahead with the proposals.

During the traditional Conservative party conference BBC interview, Ms Truss said the government made the “right decision” to borrow more this winter to cap the energy price people pay.

“I'm afraid there is an issue that interest rates are going up around the world and we do have to face that,” she told host Laura Kuenssberg.

“But I do want to say to people I understand their worries about what has happened this week.

“I do stand by the package we announced and I stand by the fact we announced it quickly because we had to act.

“But I do accept we should have laid the ground better … I have learnt from that and I will make sure that in future we do a better job of laying the ground,” Ms Truss said.

The economy was thrown into turmoil by Chancellor Kwasi Kwarteng's mini budget, which included the country’s biggest tax cuts in 50 years, abolishing the top rate among other changes.

The pound plummeted, falling to its lowest level yet against the dollar, while the FTSE tumbled, and the Bank of England was forced to step in to save the pensions system from collapse, all in a four-day period last week.

Interest rates are now predicted to treble between now and next year, rising to more than 6 per cent.

Ms Truss said the government made the “right decision” to borrow more this winter in order to cap the energy unit price in light of the “extraordinary circumstances” the country faced.

She said the UK has the “second lowest borrowing in the G7", less than France, the US, Canada and Japan. “And I think it's important people understand that,” she added.

“Of course, we need to bring down borrowing as a proportion of GDP over the medium-term, and I have a plan to do that. But what would have been wrong is for us not to have acted,” she said.

Addressing the abolition of the top rate of tax for the country's biggest earners, Ms Truss said she was committed to the plan.

She said scrapping the 45p rate was part of a plan to make the system simpler and taxes lower.

She admitted the plan was not discussed with the Cabinet, adding: “No, it was a decision the chancellor made.”

Ms Truss did not rule out cuts to public services, saying they [services] will remain “excellent”.

“What I'm going to do is make sure we get value for money for the taxpayer," she said.

“But I'm very, very committed to making sure we've got excellent frontline public services.

“And I'm not going to go into what the chancellor will announce in his medium-term fiscal plan,” she said.

“He's going to announce that very shortly, it will come together with an OBR forecast.”

Pressed on whether her refusal to rule out spending cuts suggested that she will go down that path, Ms Truss said: “No, it doesn't, because I can't exactly set out what is going to be in this plan. What I can promise is we're going to reduce debt as a proportion of GDP.”

The prime minister acknowledged the country faced a “turbulent and stormy time”.

“I'm not saying it's not going to be difficult. We do face a very turbulent and stormy time but it will deliver. It will deliver on the promises we made.

“And, in the circumstances, I'm very clear that we had to act quickly to get this plan going.”

Ms Truss ruled out publishing forecasts from the independent Office of Budget Responsibility before the chancellor's midterm plan on November 23.

She also said the government “simply didn't have time” to publish OBR data alongside the mini-budget.

Guest and shadow chancellor Rachel Reeves said some of what Ms Truss said was “shocking”.

“You showed Liz Truss a chart of what had happened to government borrowing costs and then you rightly made the point that was affecting on people’s mortgages and she said the two things were different,” Ms Reeves said.

“And they are different because the borrowing costs on mortgages are even higher than what you showed in that chart.

“And they leapt last week on the government budget. And (there is) the expectation the government will have to hike rates even further and faster because of that huge injection of spending into the economy by unfunded tax cuts.”

Michael Gove, a Tory MP who branded Ms Truss’s Conservative leadership campaign a “holiday from reality”, said cutting tax for the wealthiest during a cost-of-living crisis “is a display of the wrong values”.

“I thought it was right for the prime minister to acknowledge the events of the mini budget need to be 'revisited',” said Mr Gove, who was also a guest on Kuenssberg's show.

“It is still the case that there is an inadequate realisation at the top of government of the scale of change required.

“So, yes, the energy package was the most important thing in the fiscal event. But broadly 35 per cent of the additional money we are borrowing is not to cut energy costs. It is for unfunded tax cuts.”

He said he was “profoundly concerned” by that.

“There are two major things that are problematic with the fiscal event. The first is the sheer risk of using borrowed money to fund tax cuts. That is not conservative,” Mr Gove said.

“And then, the second thing is the decision to cut the 45p rate and, at the same time, to change the law which governs how bankers are paid in the City of London.

“Ultimately, at a time when people are suffering, when you have additional billions of pounds in play, to have as your principle decision, the headline tax move, cutting tax for the wealthiest, that is a display of the wrong values.”

Conservative MPs who vote against the government's plan for tax cuts will lose the whip, party chairman Jake Berry said.

It has been reported that some Tory MPs are preparing to vote with Labour to prevent measures announced by the chancellor on September 23.

Asked on Sky News's Sophy Ridge on Sunday whether this would result in them losing the party whip, Mr Berry said: “Yes.”

He also urged Tory MPs to unite behind Ms Truss and her programme, saying she had “a mandate both from colleagues and our membership”.

“I'm sure that if we do that it will lead ultimately to long-term electoral success,” he said.

Updated: October 02, 2022, 1:57 PM