British Prime Minister Liz Truss admitted mistakes had been made with her government’s controversial “mini-budget” announced last week – which sent the pound to historic lows and sparked market chaos – but stood by her policies.
Speaking to the BBC’s Laura Kuenssberg on Sunday morning Truss said: “I do accept we should have laid the ground better and I’ve learned from that, and I’ll make sure I’ll do a better job of laying the ground in the future.”
She said that she wanted “to tell people I understand their worries about what happened this week and I stand by the package we announced and I stand by the fact we announced it quickly.”
Last week, Truss’ government announced that they would cut taxes by £45 billion ($48 billion) in a bid to get the UK economy moving again, with a package that includes scrapping the highest rate of income tax for top earners from 45% to 40% and a big increase in government borrowing to slash energy prices for millions of households and businesses this winter.
Many leading economists described the unorthodox measures as a reckless gamble, noting that the measures came a day after the Bank of England warned that the country was already likely in a recession.
Truss said the reforms were not agreed by her cabinet, but were a decision made by Chancellor Kwasi Kwarteng. “It was a decision the chancellor made,” she told the BBC.
She doubled down on that decision however, saying that her government made the “right decision to borrow more this winter to face the extraordinary consequences we face,” referring to the energy crisis caused by the war in Ukraine. She claimed that the alternative would be for people to pay up to £6,000 in energy bills, and that inflation would be 5% higher.
“We’re not living in a perfect world, we are living in a very difficult world, where governments around the world are taking tough decisions,” Truss said.
Regarding the rising cost of living in the UK, namely the rise of mortgage rates, Truss said that is mostly driven by interest rates and is “a matter for the independent Bank of England.”
The Bank of England said Wednesday it would buy UK government debt “on whatever scale is necessary” in an emergency intervention to halt a bond market crash that it warned could threaten financial stability.
Meanwhile, Credit Suisse said that UK house prices could “easily” fall between 10% and 15% over the next 18 months if the Bank of England aggressively hikes interest rates to keep inflation in check.
The fallout could make it harder for people to get approved for mortgages, and encourage prospective buyers to delay their purchases. A drop in demand would lead to falling prices.
Truss defended her government’s policies to the BBC as the Conservative party’s annual conference kicked off in in Birmingham.
The party is bitterly divided, with its poll ratings sinking lower than they were even under the disgraced leadership of Boris Johnson.
On Sunday, that chill was evident, as Nadine Dorries, the former culture secretary who backed Truss to be prime minister, accused Truss of throwing Chancellor Kwasi Kwarteng “under a bus” in her BBC interview, when she said the tax cut decision were made by him and not the Cabinet.
“One of @BorisJohnson faults was that he could sometimes be too loyal and he got that. However, there is a balance and throwing your Chancellor under a bus on the first day of conference really isn’t it. [Hope] things improve and settle down from now,” Dorries said on Twitter.
Conservative members of parliament fear the combination of tax cuts along with huge public spending to help people cope with energy bills, rising inflation, rising interest rates and a falling pound are going to make winning the next general election impossible.