British Prime Minister Liz Truss has admitted she made communication errors when she announced massive tax cuts last week. She remains behind the plan, she said in an interview with the British broadcaster BBC.
Truss admitted she should have prepared the announcement better. The budget brought turmoil to the financial markets. The value of the British pound fell and government bonds fell so much that the Bank of England had to intervene to prevent a crisis in pension funds.
The most controversial measure in the budget, the abolition of the tax scale of 45 percent on earnings above 150,000 pounds, was not discussed with her cabinet, according to Truss, but a decision by Finance Minister Kwasi Kwarteng. At the same time, her cabinet is spending a lot on support because of the energy crisis.
Truss said she understands people are concerned about what happened. She remains behind the package of measures. “But I accept that we should have prepared the case better. I have learned from it and will make sure we do better in the future.” Earlier this week, the British Prime Minister denied that the tax cuts only benefit the rich.
Investors and economists are critical, because it is not yet known how the United Kingdom will pay for the plan. The fear is that by borrowing large sums the government can boost inflation while the central bank wants to bring it down. The International Monetary Fund also warned that the plan could increase inequality.
The panic in the markets after the announcement of the so-called mini-budget was also prompted by the lack of an independent calculation by the Office for Budget Responsibility (OBR). There would have been no more time for that, she insisted. The OBR said earlier that it could provide a prognosis.
Members of Truss’s own Conservative party have already hinted that they will vote against the budget plans. Tory MP Michael Gove told the BBC she is “displaying the wrong values” by granting tax cuts to the wealthiest Britons while many people struggle with declining purchasing power.
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