Liz Truss says she is ‘absolutely’ committed to not making public spending cuts – UK politics live
Liz Truss #LizTruss
Good morning. Liz Truss will later today take PMQs for only her second time as prime minister. On her first appearance, four weeks ago, she was praised for being refreshingly direct, answering questions that her predecessor would have swerved. She was also very forthright about her faith in low taxes, and how she believed this was the only route to growth. Today, after a month which has seen successive statements and comments from the government alarm the markets and jink the pounds, we will probably get a much more circumspect Liz Truss.
What will be particularly interesting is whether she gives any indication that she has a strategy to calm the turmoil generated by the mini-budget. It seems unthinkable that she might just abandon all or most of the mini-budget (even thought some experts think this is the only move that would be guaranteed to restore market calm.) But yesterday a senior Tory backbencher proposed exactly that. “Rowing back on tax cuts as a possibility has to be on the table because, if you can’t make the rest of the equation work, then the alternative is to go out with something that the markets are just not going to buy, and that will be a very difficult place,” said Mel Stride, chair of the Commons Treasury committee in an interview.
At her first PMQs Truss said she was opposed to windfall taxes. That may come up today because a plan announced by the government last night to cap the revenue of renewable energy generators is being described by Labour as a windfall tax. The government does not accept this. When Truss announced her energy price guarantee last month, she said she wanted to change the current pricing arrangements that mean prices paid for energy generated from renewables is linked to the price of gas, which has soared. Jacob Rees-Mogg, the business secretary, has been giving interviews morning, and he claimed that to call the new move a windfall tax “is simply mischaracterising what’s being done, and misunderstands how the market works”.
But Rees-Mogg’s most provocative comment came in an interview on the Today programme with Mishal Husain. When she suggested that the serious investor confidence problem in the financial markets was “sparked by the mini-budget”, Rees-Mogg refused to accept that, and even went on to question her professionalism. He said:
Hold on. You suggest something is causal which is a speculation. What has caused the effect in pension funds, because of some quite high-risk but low probability investment strategies, is not necessarily the mini-budget. It could just as easily be the fact that the day before the Bank of England did not raise interest rates as much as the Federal Reserve did, and I think jumping to conclusions about causality is not meeting the BBC’s requirement for impartiality. It is a commentary rather than a factual question.
The problem with this argument is blaming the mini-budget for the turmoil in the UK financial markets, where the cost of borrowing is rising sharply, is not a whacky conspiracy theory, but an explanation accepted by the majority of analysts who understand how the markets work. It is also what the Bank of England thinks, and in a letter to the Commons Treasury committee last week Sir Jon Cunliffe, deputy governor at the Bank, included this chart, indicating that it was the mini-budget (or fiscal event, as it is called in the chart) that was the trigger for the extraordinarily sharp rise in government borrowing costs.
I will post more from Rees-Mogg’s interviews soon.
Here is the agenda for the day.
10am: Graham Stuart, the climate minister, gives evidence to the environmental audit committee on energy security.
10.15am: Thinktanks, including the Resolution Foundation and the Institute for Fiscal Studies, give evidence to the Commons Treasury committee about the mini-budget.
10.30am: The supreme court resumes hearing the case brought by the Scottish government as it seeks to establish that its proposed independence referendum would be lawful.
12pm: Liz Truss faces Keir Starmer at PMQs.
5pm: Truss is expected to address the Conservative backbench 1922 Committee in private.
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