Liz Truss has refused to rule out public spending cuts and a real-terms drop in benefits to help pay for the mini-budget, as she sought to quell fury over her handling of the economy by admitting she should have “laid the ground better”.
The prime minister offered a sliver of remorse for the way last Friday’s mini-budget was received. There was a temporary collapse in the value of sterling against the dollar, a rebuke from the International Monetary Fund and warnings that interest rates could be raised again.
After less than a month in office, Truss has faced criticism from many in her own party over measures including scrapping the cap on bankers’ bonuses and axing the 45p tax rate in a bid to push for growth.
As the Conservative party conference gets under way in Birmingham, Truss sought to show she had learned lessons, but stuck by the package – leading to criticism from the former cabinet minister Michael Gove, who said there was still an “inadequate realisation” of the scale of the problems in No 10.
Truss told the BBC’s Sunday with Laura Kuenssberg programme: “I do accept we should have laid the ground better, I do accept that and I have learnt from that and I will make sure that in future we do a better job of laying the ground.”
But she added: “I do think there has been too much focus in politics about the optics or how things look – as opposed to the impact they have on our economy.”
Truss said she would “stand by” the package unveiled by the chancellor, Kwasi Kwarteng, and the speed with which it was announced.
While she said pensions would rise with inflation due to the triple lock, Truss refused to rule out public spending cuts or benefits rising lower than the level of inflation, meaning a real-terms cut.
She said people should wait for Kwarteng’s medium-term growth plan announcement on 23 November and stressed she was trying to avoid a “serious economic slowdown”, adding: “We do have a very clear plan.”
The vast majority of spending announced in the mini-budget was to help with people’s energy bills, Truss argued. “It was vitally important that we acted,” she said.
Truss said the government was “not living in a perfect world” when pressed on whether public spending cuts would help counterbalance the loss in revenue for easing taxes on higher earners.
“I believe in getting value for money for the taxpayer,” she said, promising that “excellent public services” would remain but with a warning that it would be a “difficult and stormy” winter.
The decision to cut the 45p tax rate was Kwarteng’s and he did not consult the rest of the cabinet before announcing it, Truss said.
She seemed relaxed about him reportedly attending a private champagne reception with hedge fund managers at the home of a Conservative donor on the same day he delivered his mini-budget, saying he “meets businesspeople all the time”.
Truss also said it was not possible for the Office for Budget Responsibility to publish forecasts for the economy yet, as they were “not ready”.
Asked by Kuenssberg how many people had voted for her plans, there were a few awkward seconds of silence from Truss before she asked: “What do you mean by that?”
When told the 2019 Conservative manifesto made no mention of public sector cuts, Truss said at the last election people voted for “a successful country driving growth, enterprise and opportunity”.
Watching the interview was Gove, who Boris Johnson sacked from the cabinet for calling on Johnson to quit, the day before he did so.
Gove cited concerns over the 45p tax rate cut and the scrapping of the cap on bankers’ bonuses, saying: “At a time when people are suffering … when you have additional billions of pounds in play, to have as your principal decision, the headline tax move cutting tax for the wealthiest, that is a display of the wrong values.”
Labour said Truss was failing to understand the “anxiety and fear” felt by people facing huge increases in their mortgage repayments as a result of the mini-budget.
Rachel Reeves, the shadow chancellor, said: “This is a crisis made in Downing Street but it is ordinary working people who are paying the price. The idea that trickle-down economics is somehow going to deliver the 2.5% growth we all want to see is for the birds.”
She added: “The prime minister and the chancellor are doing some sort of mad experiment with the UK economy and trickle-down economics. It has failed before and it will fail again.”
