LONDON (AP) – British Prime Minister Liz Truss defended her economic plan on Thursday, shrugging off the negative reaction from financial markets. She said she was willing to make “tough decisions” to help the economy grow.
In her first public statements since the government announced billions of dollars in tax cuts rattled markets and pushed the pound to record lows, Truss said Britain was facing “very, very difficult economic times”. But she said the problems were global and spurred on by Russia’s invasion of Ukraine.
She spoke after the Bank of England on Wednesday took emergency measures to stabilize Britain’s financial markets and avert a crisis in the broader economy after the government spooked investors with a program of unfunded tax cuts, sending the pound plummeting and caused the cost of public debt to skyrocket.
Truss told local BBC radio that “we urgently need to take action to grow our economy, get Britain moving and also manage inflation”.
“Of course, many announced measures do not come overnight. We’re not going to see overnight growth,” she said. “The important thing is that we put this country on a better course in the long term.”
In a series of interviews, Truss said her government’s decision to cap energy bills for homes and businesses would help tame inflation and help millions of people facing a cost-of-living crisis.
But it wasn’t that decision that alarmed markets. It was the government’s announcement on Friday of a stimulus package that included £45 billion ($48 billion) in tax cuts and no spending cuts – without an independent economic assessment of the costs and impact.
The Bank of England warned that faltering confidence in the economy posed a “key risk to UK financial stability” and said it would buy long-dated government bonds over the next two weeks to counter a recent fall in UK financial assets.
Former bank governor Mark Carney said the government and the central bank appear to be moving in different directions.
“Unfortunately, under these circumstances, a sub-budget – difficult world economy, difficult position in financial markets, cooperation with the bank – has led to quite dramatic movements in financial markets,” he told the BBC.
The pound traded around $1.08 on Thursday, up from Monday’s record low of $1.0373. It has lost about 4% of its value since Friday.