• Thursday, June 13, 2024

News

UK’s Truss refuses to rule out welfare cuts to fund economic plan

Already the government has been forced to reverse its plan to scrap the highest rate of income tax to appease Conservative Party lawmakers who saw it as a gift to the rich during a cost-of-living crisis.

Prime Minister Liz Truss leaves her hotel ahead of a local visit on October 04, 2022 in Birmingham, England. This year the Conservative Party Conference will be looking at “Getting Britain Moving” with more jobs and higher salaries. However, delegates are arriving at the conference as the party lags 33 points behind Labour in the opinion polls. (Photo by Leon Neal/Getty Images)

By: Melvin Samuel

British Prime Minister Liz Truss has refused to rule out cutting benefit payments by less than soaring inflation to help fund her tax-cutting growth plan in what is likely to spark the next political rebellion over her economic plans.

Truss and her finance minister Kwasi Kwarteng are racing to set out how they will pay for more than 40 billion pounds ($46 billion) of tax cuts announced last month, sparking turmoil in financial markets as they did not say how they would pay for them.

Already the government has been forced to reverse its plan to scrap the highest rate of income tax to appease Conservative Party lawmakers who saw it as a gift to the rich during a cost-of-living crisis.

Late on Monday, Kwarteng also agreed to bring forward publication of the government’s fuller plan to cut debt, alongside forecasts for economic growth and the public finances. Truss indicated the plan could include restrictions on welfare benefit increases.

Asked if benefits would rise in line with inflation, which came in at 9.9% in August, Truss told the BBC: “We are going to have to make decisions about how we bring back down debt as a proportion of GDP in the medium term.”

“We have to look at these issues in the round. We have to be fiscally responsible.”

Truss – elected as prime minister by party members but not the broader public – is seeking to jolt the economy out of a decade of stagnant growth with a 1980s-style plan to cut taxes and regulation, much of it funded by vast government borrowing.

But she does so at one of the most difficult times for the economy, with the government having to spend tens of billions of pounds to subsidise energy bills and consumers reining in spending ahead of what is expected to be a difficult winter.

TAKE FRIGHT

Investors have taken fright at the government’s plan, hammering the value of British assets to such an extent that the Bank of England had to intervene to shore up markets.

Damian Green, a former senior minister in the government of Theresa May and part of the centrist faction of the Conservative Party, indicated he would oppose any efforts to raise welfare in line with average earnings instead of inflation.

Asked by the BBC if the government could win a parliamentary vote on the move, he said: “Probably not. I think there will be many of my colleagues who think that when you’re reaching for spending cuts, benefit payments are not the way to do it.”

Penny Mordaunt, leader of the House of Commons, also said it made sense to keep welfare payments in line with inflation. “That’s what I voted for before and so have a lot of my colleagues,” she told Times Radio.

Markets have stabilised since the BoE action last week. Investors also took some comfort from the government’s decisions not to scrap the top rate of tax and bring forward the publishing date for its next fiscal plan from Nov. 23.

British government borrowing costs fell again in early trade on Tuesday but remain higher than before Kwarteng’s mini-budget announcement on Sept. 23 for maturities not covered by the BoE’s emergency plan to buy longer-dated gilts.

Mel Stride, head of the Treasury Committee in parliament, welcomed the move to bring forward the announcement of fuller budget details. He said it would help if they were published before the next BoE rate announcement on Nov. 3.

(Reuters)

Related Stories

Videos

Mrunal Thakur on Dhamaka, experience of working with Kartik Aaryan,…
Nushrratt Bharuccha on Chhorii, pressure of comparison with Lapachhapi, upcoming…
Abhimanyu Dassani on Meenakshi Sundareshwar, how his mom Bhagyashree reacted…

Adblocker detected! Please consider reading this notice.

We've detected that you are using Ad Blocker or some other adblocking software which is preventing the page from fully loading.

We strive to deliver high-quality content and experiences. To help us continue, please consider supporting us by disabling your ad blocker.  We use non-intrusive ads to keep our content free.

We don't have any banner, Flash, animation, obnoxious sound, or popup ad. We do not implement these annoying types of ads!

We need money to operate the site, and almost all of it comes from our online advertising.

Please add EasternEye.biz to your ad blocking whitelist or disable your adblocking software.

×