Liz Truss has asked for patience to put her full economic strategy into practice in the wake of massive market disruption triggered by Kwasi Kwarteng’s mini-budget. Meanwhile, the Chancellor himself has insisted he had been left with “no choice” but to “do something different” in order to breathe life into the economy.
Both the Prime Minister and Mr Kwarteng set out their ideas at an end of a tumultuous week which has seen the Pound Sterling plummet to record lows against the dollar at one point, with fears of a looming recession.
At one stage the Bank of England was forced to spend billions buying up government debt to prevent a collapse of the pensions industry.
The sell-off of sterling triggered fears that millions of mortgage holders could face huge rises in their repayments as the Bank moves to ratchet up interest rates to shore up the currency and prevent skyrocketing inflation.
As of close of business yesterday, Sterling had rebounded to $1.11.
Writing in The Sun, Ms Truss – who on Thursday conducted a round of sometimes-awkward interviews on local radio stations – insisted she was “pushing unashamedly for growth”.
She said: “At the same time, we will keep an iron grip on the national finances as part of our commitment to sound money.
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“I understand times are tough. Bills are high, people are worried.
“Together, we will get through this and put Britain on the path to long-term success.”
Turmoil erupted after markets were spooked by Mr Kwarteng’s £45 billion package of unfunded tax cuts – the biggest in 50 years – despite the Government committing billions to capping energy bills for the next two years.
With the Tories trailing in the opinion polls – one showed Labour opening up a massive 33-point lead – some Conservative MPs have been pressing for a change of course.
Mr Kwarteng is due to publish a medium-term fiscal plan setting out how he intends to get debt falling as a proportion of GDP alongside an updated set of economic forecasts from the Office for Budget Responsibility (OBR) next month.
After a highly unusual meeting on Friday with both the Prime Minister and the Chancellor, the head of the OBR, Richard Hughes, confirmed they would deliver their preliminary forecasts to the Treasury at the end of next week.
However, Mr Kwarteng is insisting on sticking to the original November 23 date to allow ministers to set out a series of supply side reforms to support the growth plan.
Writing in The Telegraph, he said his Medium-Term Fiscal Plan would will set out a credible strategy to reduce debt, with “new fiscal rules and a commitment to spending discipline”.
He added: “The British taxpayer expects their government to work as efficiently and effectively and possible, and we will deliver on that expectation.
“Not all the measures we announced last week will be universally popular. But we had to do something different. We had no other choice.”
Mr Kwarteng vowed: “Even in the face of extreme volatility in global markets, with major currencies wrestling an incredibly strong US dollar, we will show financial markets and investors that our plan is sound, credible and will work to drive growth.”