Truss reaffirms controversial budget plans – “Had to act”

Liz Truss, British Prime Minister

The prime minister has announced a detailed debt reduction program with her finance minister. Above all, the reduction in the top tax rate was criticized.

(Photo: Reuters)

London Britain’s new Prime Minister, Liz Truss, is trying to contain the damage after the pound slumped as a result of her borrowing plans. She should have done more to prepare the ground for her project, Truss told the BBC on Sunday.

However, she stands by the package. “And I stand by the fact that we announced it quickly because we had to act.” Truss later announced a concrete step to cut red tape at the start of her Conservatives’ annual conference.

From Monday, companies with fewer than 500 employees will be considered small businesses, it said in a statement. The limit is currently 250. This would allow 40,000 more companies to use simplified regulations.

Truss’ growth plan, which was presented about a week ago, has been criticized for providing billions in additional spending – but hardly any details on how this is to be financed in the short term. According to experts, the measures could cost the equivalent of almost 230 billion euros.

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Finance Minister Kwasi Kwarteng also left details open on Saturday. In an article for the Telegraph newspaper, he merely confirmed that he would present a “credible plan” for debt reduction in November. There will also be a commitment to bringing public spending under control. It is clear that the measures announced were not met with approval everywhere. But you had no choice.

>>Read also: “We had to act urgently”: Truss defends tax cuts against heavy criticism

The rating agency S&P recently joined the skeptical view of other institutions and lowered the outlook for British government debt from “stable” to “negative”. The agency Moody’s and the International Monetary Fund (IMF) also have concerns. A worse rating can mean that higher interest rates have to be paid to take on new debt – which limits the scope for action.

Tory leader: Markets may have overreacted

It is unclear whether the plans will cause the debt to rise further or whether the measures will pay for themselves, as the government hopes. On the foreign exchange market, the pound fell to its lowest level in 37 years against the dollar last week.

The bond market also went downhill. Ultimately, the British central bank intervened to mitigate the upheaval. Conservative leader Jake Berry said on Sunday markets may have overreacted. “So let’s see where the markets are in six months time,” he told Sky News.

The project is also controversial in the conservative party of Truss. The main issue here is the planned abolition of the highest income tax rate of 45 percent. Some conservatives worry about being seen as the party that cuts taxes on the wealthiest while doing little for the weakest. Truss said she supports eliminating the top tax rate.

However, the decision was made by Kwarteng. Truss left open the question of whether the elimination of some taxes would have to be paid for with cuts in public services.

More: Truss jeopardizes Britain’s economic fortunes

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