Economic network

Economic storm tests new UK leader and alarms Tories

LONDON (AP) — Britain’s new Prime Minister Liz Truss came under mounting pressure on Wednesday from her opponents — and from within her Conservative party — to roll back announced tax cuts that are fueling a financial crisis in a already struggling economy.

The Bank of England has stepped in to buy government bonds in a bid to stabilize the cost of borrowing after the government last week said it would cut income tax and scrap a…

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LONDON (AP) — Britain’s new Prime Minister Liz Truss came under mounting pressure on Wednesday from her opponents — and from within her Conservative party — to roll back announced tax cuts that are fueling a financial crisis in a already struggling economy.

The Bank of England stepped in to buy government bonds in a bid to stabilize the cost of borrowing after the government said last week it would cut income tax and scrap a planned hike in the corporate taxes, while spending billions to curb soaring energy bills for homes and businesses.

Friday’s “mini-budget” sparked market unease over the level of Britain’s public debt and sent the pound plunging to a record low against the US dollar.

Neither Truss nor Treasury chief Kwasi Kwarteng has made a public statement about the unrest. Conservative lawmakers watched with growing concern as the currency struggled to near-record highs. Britain’s central bank has signaled that a sharp rise in interest rates is in the cards for its next meeting, scheduled for November.

“This inane madness cannot continue,” Tory MP Simon Hoare wrote on Twitter. Another Conservative lawmaker, Robert Largan, said he had “serious reservations” about some government announcements.

“There’s a lot of concern within the parliamentary party, there’s no doubt about that,” said Mel Stride, Conservative chairman of the House of Commons Treasury committee.

Andrew Griffith, a junior treasury minister, said the government would not back down, but would “continue and implement” its plan.

All the main opposition parties have demanded parliament be recalled early after a two-week recess so lawmakers who are not due to return to the Commons by October 11 can deal with the crisis.

“A lot of people will now be extremely worried about their mortgages, rising prices and now about their pensions,” said Labor Party leader Keir Starmer. “What the government needs to do now is call Parliament back and scrap this budget before more damage is done.”

Truss was appointed Prime Minister on September 6 after winning a Conservative Party leadership race to replace Boris Johnson, who resigned in July after a three-year term marred by ethics scandals.

Truss, a champion of low-tax, free-market conservatism who cites 1980s political icons Margaret Thatcher and Ronald Reagan as inspirations, has pledged on her campaign to cut taxes and red tape to boost the economy. Britain’s sluggish economy.

Truss and Kwarteng have vowed to challenge the economic “orthodoxy” they say is holding Britain back. One of Kwarteng’s first acts in office was to fire senior Treasury official Tom Scholar.

But many conservatives were surprised by the scale of the announced tax cuts – and the strength of the market reaction.

The £45billion ($49billion) cuts, which will be funded by borrowing, will come after the government just agreed to spend billions more to help protect homes and businesses from soaring prices energy caused by Russia’s invasion of Ukraine.

Growing debt increases the prospect that the government will have to borrow more, at an ever-increasing cost, and will have to reduce public spending accordingly.

The government said it would explain on November 23 how it plans to pay for the cuts, alongside the economic forecast from the Independent Office for Fiscal Responsibility.

“I don’t think we can wait until November,” Tory lawmaker Roger Gale told the BBC. “We need a statement very quickly to calm the nerves, stabilize the market and very clearly define what the business plan is.”

Adam Tomkins, a former Conservative member of the Scottish Parliament, said ‘Trussonomics’ was “deeply anti-Conservative”.

Tomkins, now a law professor at the University of Glasgow, said the ‘hammering’ of the pound ‘is the strongest possible sign that markets aren’t buying the new recklessness, the dogma that you can cut your taxes to reduce public spending.

“What we’re seeing right now is not just the Conservative Party trashing its own brand: it’s the Conservative Party trashing the economy,” he wrote in the Herald newspaper.

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