LONDON: Liz Truss, the prime minister of the United Kingdom, defended the mini-budget passed last week, claiming that it was a "decisive step" that had to be taken.
Truss defended her decision to reduce taxes and raise borrowing on Thursday, saying "we had to take bold action," BBC reported, in her first remarks on the market volatility since Chancellor Kwasi Kwarteng's announcements on September 23.
The prime minister added that in order to get the economy rolling, the government was prepared to make "controversial and difficult decisions" and was striving to shield citizens from high energy expenses. She added that the mini-budget puts the UK on a "better trajectory for the long-term," but growth won't "come through overnight."
Truss asserted that she was following the "correct plan" and refuted the claim that the tax cuts only benefited the wealthy. She said that this "just isn't true."
Following the statements, there have been some concerns over pension funds. In response, Truss stated that the Bank of England (BoE) looks after pensions "quite well." The Prime Minister said that by reducing overall inflation, her energy package will also assist lower food prices. While talking about fracking, Truss indicated her administration will only move forward in locales "where there is local community support."
The announcements made by Kwarteng include retaining company tax at 19 percent instead of raising it to 25 percent and rolling back the 1.25 percentage point increase in National Insurance contributions that was set to take effect in April.
A year earlier than expected, in April 2023, he also announced a 1 percent reduction in the base rate of income tax to 19 percent. Also, the additional 45 percent income tax rate on earnings over 163,000 British pounds (£150,000) would be eliminated.
Along with these measures, Kwarteng established a target of 2.5 percent economic growth. The largest package of tax cuts and reforms in generations, according to the Chancellor, "sends a strong signal that growth is our focus." The largest tax cut since 1972 is a 45 billion pound reduction.
Investors were concerned that broad tax cuts would increase public borrowing, create significant fiscal uncertainty, and raise inflation, which was already high, and the pound dropped more than 3 percent to a 37-year low versus the dollar after the news.