By Ben Kerrigan-
Uk Prime minister, Liz Truss, has finally admitted her mini-Budget package gives “disproportionate” gains to the richest in society, but insisted it was “the right plan” to deliver economic growth.
The PM broke went into reverse gear after five days of silence since the launch of chancellor Kwasi Kwarteng’s “growth plan”, which sparked turbulence in the financial markets, triggering an unprecedented slump in the value of the pound, leading to wide condemnation from all quarters.
The Bank of England was forced to intervene in what was generally considered a looming crisis in the British economy, in order to salvage the disturbing potential state of economic ruin in the Uk.
Despite subsequent assurances from Kwasi Kwarteng who said he had been speaking with Bank of England bosses regularly.
In a series of interviews with BBC local radio stations ahead of Sunday’s Conservative Party conference, the prime minister dismissed calls to calm the situation by reversing some of Mr Kwarteng’s measures or raising funds from a windfall tax on energy companies.
She repeatedly attempted to shift the blame Vladimir Putin’s invasion of Ukraine for the mayhem of the past few days.
She conceded that the rich will gain most in cash terms from Mr Kwarteng’s tax cuts, worth an average of £10,000 a year to those on salaries of over £150,000 but just £330 to basic-rate income taxpayers and nothing to those earning less than £12,750
Economic experts figure out that half of the £45bn package will go to the top 5 per cent of earners, with anyone earning less than £155,000 paying more overall as a result of tax changes during this parliament.
Ms Truss claimed that the “biggest thing” in the Budget package was support worth billions for domestic energy bills, even though this was contained in a separate announcement earlier in the month, which did not provoke any panic in the markets.
She insisted that the overall package was “the right plan”. And she rejected demands for part of the cost of energy support to be funded in part by a windfall tax on the estimated £170bn in excess profits taken in by energy giants, denouncing it as an “arbitrary” levy which would deter investment in the UK.
Ms Truss brushed aside criticisms that her government’s plans amounted to ”inept madness, insisting: “This is the right plan that we’ve set out. This is about making sure the people are going into the winter not worried about ultra-high fuel bills…
“And it’s also important that we’ve taking steps to improve growth levels in our economy because if we don’t, we’re not going to get the high-wage jobs, we’re not going to get the opportunities, we’re not going to get the investment that we need to see in our country.”
Ms Truss claimed that the package unveiled by Mr Kwarteng on Friday has “put this country on a better trajectory for the long-term”, but admitted that higher growth “will not come overnight”
In response to a question on BBC Radio Kent she was asked whether she was “ashamed” by her actions, replying. “I think we have to remember what situation this country was facing…
“I’m very clear that the government has done the right thing by taking action urgently to deal with inflation, to deal with the economic slowdown and to deal with the high energy bills.
“Of course that involves taking difficult decisions and as prime minister I’m prepared to take difficult decisions and do the right thing.”
When questiooned over whether her package – which gave tax cuts averaging £10,000 to high earners – was “fair”, the PM told BBC Radio Lancashire: “What is fair is that people were facing huge energy bills this winter of up to £6,000 and because the government has stepped in we are making sure that nobody faces energy bills of over a typical £2,500 from this weekend.”
Ms Truss suggested her economic plan could still prevent a recession – despite the Bank of England warning the UK may already be in a recession after estimating that the economy had shrink by 0.1 per cent in the last financial quarter.
Ms Truss defended her tax-cutting approach, telling Radio Nottingham: “For too long, the debate in this country has been about distribution rather than about how we grow our economy.
“If we don’t grow our economy, that means there won’t be new investment, it means there won’t be new jobs and it will mean that people don’t get the higher pay they deserve.
“I’m prepared to take the difficult decisions to get our economy growing. It’s not necessarily popular to keep corporation tax low but it’s important to do because I want to attract investment into this country.
Liberal Democrat deputy leader Daisy Cooper said Ms Truss was “in complete denial about the damage caused by her reckless and out-of-touch Budget”.
Only yesterday, the International Monetary Fund was vocal in its criticism of Ms Truss. “Given elevated inflation pressures in many countries, including the U.K., we do not recommend large and untargeted fiscal packages at this juncture,” the IMF said in an unusually outspoken statement on Tuesday.
The wave of criticism against the highly contentious mini budget announced by the British government, Truss’s newly appointed and briefly celebrated Finance Minister Kwasi Kwarteng, announced an integral component to the new prime minister’s economic plan: scrapping the tax rate for top income levels in a tax cut package worth £45 billion ($48 billion) over the next five years.
The U.K. government is also planning on bumping up its borrowing rate significantly to around £100 billion a year, according to recent research by the Institute for Fiscal Studies (IFS), a think tank to account for its proposed tax cuts.
Projections from March also indicates that the Uk government borrowing in the U.K. would not rise above £50 billion a year, and would dip below £40 billion by the mid-2020s, according to the IFS.
The IMF warned that Truss’s package could be at “cross-purposes” with the Bank of England’s monetary policy designed to bring down soaring inflation in the country. It urged Truss’s administration to reconsider the package.
“The November 23 budget will present an early opportunity for the U.K. government to consider ways to provide support that is more targeted and re-evaluate the tax measures,” the IMF said.
The IMF also warned that the new policies, especially the tax cuts, would “likely increase inequality” in the country and benefit high-income earners.