UK PM Liz Truss ‘sorry’ over tax cut fiasco, says ‘went too far too fast’

UK Prime Minister Liz Truss, who is facing calls to resign even from her own MPs, Monday apologised for going “too far too fast” with reforms that have triggered economic turmoil in the country. “I do want to accept responsibility and say sorry for the mistakes that have been made… we went too far and too fast,” she told the BBC. Truss tendered the formal apology on the day the UK government axed almost all of its debt-fuelled tax cuts unveiled last month to avert fresh market chaos.

Truss, who has already staged two embarrassing budget U-turns, scrapping tax cuts for the richest earners and on company profits, however, vowed to remain leader. She said that she was “completely committed to delivering for this country” despite questions over who was now in control of government policy.

Hunt pulls plug on Trussonomics

In a shock move Monday, new U.K. Chancellor of the Exchequer Jeremy Hunt, who was appointed by PM Liz Truss on Friday, after she sacked Kwasi Kwarteng, pulled the plug on her entire blueprint for growth. In a brief, five-minute televised statement, Hunt read the last rites on Trussonomics, after weeks of market turmoil following Truss’ controversial tax-cutting budget of September 23.

“Growth requires confidence and stability,” Hunt said in an apparent admission that Truss has been unable to provide either since she was elected Tory party leader and prime minister on September 6. With Hunt ripping up the economic policies on which she came to power, Rishi Sunak was oddly vindicated; Hunt had backed Sunak in the Tory leadership race.

With Truss sitting next to him, Hunt outlined his plans in greater detail to the Commons, announcing the government would be advised by an independent four-member panel that would include Sushil Wadhwani, who was an Indian member of the Bank of England’s Monetary Policy Committee from June 1999 to May 2002. Hunt’s statement has left Truss in a precarious state, with Conservatives MP Roger Gale saying Hunt was “de facto prime minister”. Hunt’s action also sent the British pound soaring against the dollar and euro, while bond yields dipped.

Also read: UK PM Liz Truss may be ousted by this week: Report

The U-Turns

Hunt scrapped plans to axe the lowest rate of income tax, and curbed the government’s flagship energy price freeze — pulling the plug in April instead of late 2024. After April, his department will “review” its energy support package, he said. Hunt estimated the tax changes would raise about £32 billion ($36 billion) per year, after economists estimated the government faced a £60-billion black hole.

Hunt also warned of tough spending cuts. The chancellor of the exchequer said no government could control market. His action, he stressed, would give certainty over public finances and help secure growth. “The prime minister and I agreed yesterday to reverse almost all the tax measures announced in the growth plan three weeks ago,” he told Parliament.

A proposed reduction in shareholder dividend tax was also scrapped, along with planned tax-free shopping for tourists and a freeze on alcohol duty. The announcement comes amid Britain’s worsening cost-of-living crisis.

Truss fired her close friend Kwarteng on Friday after their recent tax-slashing budget sent bond yields spiking and the pound collapsing to a record dollar-low on fears of rocketing UK debt — fuelling intense speculation over her political future one month after taking office.

Also read: British PM Liz Truss sacks Finance Minister Kwasi Kwarteng

Tough days ahead

“There will be more difficult decisions I am afraid, on both tax and spending, as we deliver our commitment to get debt falling as a share of the economy over the medium term,” Hunt cautioned.  “All departments will need to redouble their efforts to find savings, and some areas of spending will need to be cut.” Hunt stated that he was not taking anything off the table amid speculation of cutbacks on areas like defence, hospitals and schools.

Over the weekend, he met with the governor of the Bank of England, Andrew Bailey, and the head of the Debt Management Office for talks. In the wake of the earlier turmoil, the BoE launched emergency buying of UK government bonds — a policy that ended Friday. The budget furore has reportedly sparked a plot to oust the prime minister.

In two weeks’ time, Hunt will unveil his medium-term fiscal plan alongside independent economic forecasts from the Office for Budget Responsibility. But the main opposition Labour party, riding high in the polls, said the ruling Tories were responsible for “chaos and fiasco”. “This is a Tory crisis, made in Downing Street, but ordinary working people are paying the price,” its finance spokeswoman Rachel Reeves told parliament.