Truss Sticks to Tax Cut Plan, Says "Will Not Cut Public Spending"

Attendance at the National Assembly "Reduce Government Debt by Utilizing Funds Well Without Cutting Spending"

Liz Truss, Prime Minister of the United Kingdom [Photo by AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] UK Prime Minister Liz Truss appeared in the House of Commons on the 12th (local time) and stated that public spending would never be cut, according to a report by the British BBC on the same day.

Following the UK government's announcement of a large-scale tax cut plan worth ?43 billion on the 23rd of last month, concerns about the expansion of government debt have increased, and there have been calls for the government to reduce spending. However, Prime Minister Truss directly refuted these claims.

The day before, the UK think tank Institute for Fiscal Studies (IFS) and investment bank Citigroup diagnosed that the UK government would need to cut spending by ?60 billion (95 trillion won) or raise taxes to maintain or reduce national debt.

Keir Starmer, leader of the opposition Labour Party, also called for the withdrawal of the ?43 billion tax cut plan during a Q&A session with Prime Minister Truss on the same day.

However, Truss emphasized that the government would reduce debt not by cutting public spending but by using public funds efficiently. She stressed her confidence that government debt would decrease in the medium term.

Truss mentioned that global interest rates are rising due to the Ukraine war and emphasized that, despite the very difficult global situation, the government would protect the UK economy, and eventually, growth rates would rise and inflation would fall.

Following the announcement of the ?43 billion tax cut plan last month, the UK government bond market, shaken by concerns over government finances, showed an unstable trend again on this day.

The yield on the UK 30-year government bond rose by 0.02 percentage points from the previous day to 4.81%. Although there was little change at the closing price, it surged during the day to reach 5.09%, the highest since 2002, before significantly narrowing the increase near the close. Before the announcement of the ?43 billion tax cut plan last month, the 30-year government bond yield was below 4%.

The 10-year government bond yield recorded 4.42%, down 0.02 percentage points from the previous day, but during the day it rose to 4.64%, the highest since 2008.

The UK Office for National Statistics (ONS) announced that GDP in August fell by 0.3% compared to July. The ONS also stated that the three-month cumulative GDP up to August decreased by 0.3% compared to the previous three months. This has led to speculation that the UK economy may already be in a recession.

Nomura Securities forecast a weakening of the pound and predicted that the pound would fall below 1 pound per dollar by the end of November.

This content was produced with the assistance of AI translation services.