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Truss defends her economic plan as British Conservatives rally

Truss defends her economic plan as British Conservatives rally
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  • PM defends economic plan and says it’s right
  • Also tried to calm down the party publicly
  • Says Kwarteng made a decision about a high tax rate

BIRMINGHAM, England (Reuters) – Britain’s Prime Minister Liz Truss on Sunday tried to reassure her party and the public by saying she should have done more to ‘prepare the ground for an economic plan’ that lifted the pound Dropped record lows and government borrowing costs soared.

On the first day of her ruling Conservative Party’s annual conference, Truss, who had been in office less than a month but was already under intense pressure, sought out and softer tones saying she would support the public through a difficult winter and beyond.

She defended her “growth plan,” a package of tax cuts that has been criticized by investors and many economists for calling for billions of dollars in spending while providing few details on how it would be paid for in the short term.

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Truss said it was the right direction, hinting that she had not fully explained to critics the depth of Britain’s problems and the urgent need for a radical plan. Traders and investors have dismissed this argument as the reason for the pound’s fall and the rise in borrowing costs over the past week.

But what some Conservative lawmakers fear will hurt their prospects in a 2024 election, Truss didn’t deny that the plan would require spending cuts on public services and refused to commit to increasing welfare benefits in line with inflation , while advocating a tax cut for the richest.

Asked what she was doing to allay concerns in the UK about her plan’s impact on mortgages, credit and rent, Truss told the BBC: “I understand your concerns about what happened this week,” she told the BBC BBC in central English city of Birmingham.

“I stand by the package that we announced and I stand by the fact that we announced it quickly because we had to act, but I accept that we should have prepared the ground better.”

Jake Berry, leader of the Conservative Party, suggested markets may have overreacted but admitted he was no economist. “So let’s see where the markets are in six months,” he told Sky News.

TROUBLE AHEAD?

Truss took office on 6/9, but Queen Elizabeth died two days later, so the first few days of the new Prime Minister’s tenure were largely taken up with the national mourning period, when politics was all but paused.

She launched her plan two weeks after taking office, with her team feeling she signaled her plans during a leadership campaign against rival Rishi Sunak, who had opposed immediate tax cuts.

But the scale of the unfunded cuts spooked markets. After a major sell-off, the pound has recovered following intervention by the UK’s central bank, the Bank of England, but government borrowing costs remain significantly higher.

Investors say the government needs to work hard to restore confidence and the BoE emergency round of asset purchases is only set to run until October 24th. 14, leaving Truss with little time.

It wasn’t the setting she wanted for her first party conference as prime minister.

She arrived in the main concourse to cheers and a standing ovation, but only half the seats were taken, partly because of a train strike over the weekend, but also possibly a sign of unease about her package.

Some in the party fear they risk being seen as “the evil party,” cutting taxes on the wealthiest while doing little to improve the lives of the weakest.

In what could be a sign for the future, Business Secretary Jacob Rees-Mogg was snubbed by a dozen protesters who chanted “Not welcome here” as he arrived at the conference centre. He had to be escorted by the police.

A former minister, Michael Gove, long at the heart of government, has also scrapped the party’s plans to abolish the top 45% income tax and indicated he could vote against it, and Andy Street, the Conservative Mayor of Birmingham, said: he would have not made that policy.

“It’s going to be very, very difficult to argue that if we cut taxes on the wealthiest, it’s okay to cut welfare,” Gove said at an event at the conference.

Truss argued that the move was part of simplifying the tax system, but added decision on the top tax was taken over by her finance minister, Kwasi Kwarteng.

She also pointed out that politicians spend too much time worrying about how their policies will be received by the public and said she is focused on driving growth.

But she struggled to answer whether removing some taxes would have to be paid for with cuts in public services. Rather than deny it, she said she wanted the best possible services that offer taxpayers good value for money.

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Like the Bank of England threw a lifeline to the markets

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Reporting by Elizabeth Piper and Andrew MacAskill; Additional reporting from Hannah McKay and Alistair Smout; Edited by Gareth Jones, Jan Harvey and Frances Kerry

Our standards: The Thomson Reuters Trust Principles.

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