Prime minister Liz Truss has admitted her mini-Budget package gives “disproportionate” gains to the richest in society, but insisted it was “the right plan” to deliver economic growth.
The PM broke cover after five days of silence since the launch of chancellor Kwasi Kwarteng’s “growth plan”, which triggered turmoil in the financial markets and a slump in the value of the pound and prompted the unprecedented spectacle of the International Monetary Fund urging the government of a major economy to “re-evaluate” its plans and the Bank of England intervening to prevent the collapse of major pension funds.
In a series of interviews with BBC local radio stations ahead of Sunday’s Conservative Party conference, the prime minister dismissed calls to calm the situation by reversing some of Mr Kwarteng’s measures or raising funds from a windfall tax on energy companies.
She repeatedly tried to blame Vladimir Putin’s invasion of Ukraine for the mayhem of the past few days.
And she claimed that the “biggest thing” in the Budget package was support worth billions for domestic energy bills, even though this was contained in a separate announcement earlier in the month, which did not provoke any panic in the markets.
Speaking just 23 days after entering No 10, Ms Truss was forced to deny that she had unleashed a “Robin Hood in reverse” policy which would make wealthy people tens of thousands of pounds better-off, while leaving mortgage-holders fearful for their homes with interest rates expected to spike upwards.
But she accepted that the rich will gain most in cash terms from Mr Kwarteng’s tax cuts, which are worth an average of £10,000 a year to those on salaries of over £150,000 but just £330 to basic-rate income taxpayers and nothing to those earning less than £12,750.
Independent economists calculate that almost half of the £45bn package will go to the top 5 per cent of earners, with anyone earning less than £155,000 paying more overall as a result of tax changes during this parliament.
Ms Truss said: “We cannot tax our way to growth. We had the highest tax rates in this country for 70 years across the board, we’ve reduced those taxes across the board. And of course people who are better off tend to pay more taxes, so there’s a disproportionate effect there.”
But she insisted that the overall package was “the right plan”. And she rejected demands for part of the cost of energy support to be funded in part by a windfall tax on the estimated £170bn in excess profits taken in by energy giants, denouncing it as an “arbitrary” levy which would deter investment in the UK.
Despite Tory MPs branding her package “inept madness” and a “disaster”, Ms Truss insisted: “This is the right plan that we’ve set out. This is about making sure the people are going into the winter not worried about ultra-high fuel bills…
“And it’s also important that we’ve taking steps to improve growth levels in our economy because if we don’t, we’re not going to get the high-wage jobs, we’re not going to get the opportunities, we’re not going to get the investment that we need to see in our country.”
Ms Truss claimed that the package unveiled by Mr Kwarteng on Friday has “put this country on a better trajectory for the long-term”, but admitted that higher growth “will not come overnight”.
She repeatedly blamed the global situation – including the war in Ukraine – for economic problems which have seen the British pound plunge in value against a range of international currencies since Friday.
But on BBC Radio Bristol, presenter James Hanson retorted: “This isn’t just about Putin. Your chancellor on Friday opened up the stable door and spooked the horses so much you can almost see the economy being dragged behind them.”
On BBC Radio Kent she was asked whether she was “ashamed” by her actions, replying. “I think we have to remember what situation this country was facing…
“I’m very clear that the government has done the right thing by taking action urgently to deal with inflation, to deal with the economic slowdown and to deal with the high energy bills.
“Of course that involves taking difficult decisions and as prime minister I’m prepared to take difficult decisions and do the right thing.”
But as she responded to another question over the Budget by trying to discuss the energy package, presenter Anna Cookson interrupted to ask her: “Haven’t you been reading the news?”
And when Ms Truss said she was “working very closely with the Bank of England”, Cookson responded: “They are putting out your fire, to be fair.”
Challenged over whether her package – which gave tax cuts averaging £10,000 to high earners – was “fair”, the PM told BBC Radio Lancashire: “What is fair is that people were facing huge energy bills this winter of up to £6,000 and because the government has stepped in we are making sure that nobody faces energy bills of over a typical £2,500 from this weekend.”
Ms Truss suggested her economic plan could still prevent a recession – despite the Bank of England warning the UK may already be in a recession after estimating that the economy had shrink by 0.1 per cent in the last financial quarter.
She told BBC Radio Tees: “If we have higher taxes going into difficult economic times that is likely to lead to a recession, and my concern is I want people to stay in jobs, I want people to earn higher wages. And that is why we took action on tax.”
Ms Truss defended her tax-cutting approach, telling Radio Nottingham: “For too long, the debate in this country has been about distribution rather than about how we grow our economy.
“If we don’t grow our economy, that means there won’t be new investment, it means there won’t be new jobs and it will mean that people don’t get the higher pay they deserve.
“I’m prepared to take the difficult decisions to get our economy growing. It’s not necessarily popular to keep corporation tax low but it’s important to do because I want to attract investment into this country.”
Shadow chancellor Rachel Reeves said the PM’s intervention had “made this disastrous situation even worse”.
“Her failure to answer questions about what will happen with people’s pensions and mortgages will leave families across the country facing huge worry,” said Ms Reeves.
“If the prime minister continues to prioritise saving her face over saving people’s homes, Tory MPs must join Labour in calling for parliament to be recalled so this kamikaze budget can be reversed.
“Failure to do so will make them complicit in this reckless bout of economic self-harm.”
Liberal Democrat deputy leader Daisy Cooper said Ms Truss was “in complete denial about the damage caused by her reckless and out-of-touch Budget”.
Ms Cooper said: “She failed to offer any reassurance to people who are worried sick about the impact on their mortgages, pensions and bills. Instead, the prime minister is digging in with this totally disastrous approach that only benefits the very wealthiest while the vast majority suffer.
“Every day this government refuses to admit its mistakes risks doing more irreparable damage to our economy while people are left terrified about losing their homes. It’s time for Liz Truss to cancel the Conservative party conference, recall parliament and focus on fixing this mess.”
The SNP’s leader at Westminster Ian Blackford described the PM’s interviews as a “car crash” and repeated calls for her to recall parliament to reverse the Budget.
“If this tin-eared prime minister refuses to act then she should step aside and let someone else do the right thing before millions of people suffer,” said Mr Blackford.
“No-one will feel reassured after the prime minister’s car crash radio interviews this morning – and the longer she refuses to act the more damage she will do.”
