LIZ Truss's spokesman has suggested she could cut public spending after all despite the Prime Minister's "absolute" commitment during PMQs just a few hours ago.
As economists and the financial markets continued to question her plans, the Prime Minister said she was “absolutely” not planning public spending reductions. She insisted taxpayers’ money will be used well.
The cost of Government borrowing increased on Wednesday while sterling fell against the euro and dollar in the latest signs of market turbulence.
Earlier, Business Secretary Jacob Rees-Mogg suggested the Bank of England’s failure to raise interest rates in line with the US was driving the turmoil in financial markets rather than Kwasi Kwarteng’s mini budget.
Economists have suggested that restoring confidence in the Government’s grip on the national finances will require tens of billions of pounds’ worth of spending cuts or tax rises.
During PMQs Labour leader Keir Starmer said that during her Tory leadership campaign Truss had pledged “I’m not planning public spending reductions”.
Asked if she is going to stick to that, she replied: “Absolutely … We are spending almost £1 trillion of public spending. We were spending £700 billion back in 2010.
“What we will make sure is that over the medium term the debt is falling. But we will do that not by cutting public spending but by making sure we spend public money well.”
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But within hours of PMQs, despite the public commitment by Truss, the Prime Minister’s official spokesman warned “difficult decisions” would need to be made on spending.
“We are clear there will need to be difficult decisions to be taken given some of the global challenges we’re facing,” the spokesman told reporters.
“I appreciate the interest but I’m not going to get drawn into what those might look like.”
Responding to the Prime Minister’s spokesperson going back on her commitment to not cut public spending, the SNP’s Westminster depute leader Kirsten Oswald MP, said: “If the Tories are already rolling back on this categorical commitment, then it simply proves you can’t trust a word Liz Truss says - and the only way to keep Scotland safe from Tory cuts is to become an independent country.
“Having wrecked the economy and trashed household budgets, it’s clear the Tories are now intending to impose billions of pounds of cuts, which threaten our NHS, schools, social security and public services across Scotland.
“People in Scotland will never forgive the Tories if they plough ahead with these devastating cuts.
"And with the Labour Party backing the broken Tory economics of a hard Brexit, it’s clear independence is the only route to prosperity for Scotland.”
Also during PMQs, Starmer called for a reversal of the “kamikaze budget”, which relies on borrowing to fund £43bn of tax cuts intended to stimulate economic growth.
He told her: “Does she think the public will ever forgive the Conservative Party if they keep on defending this madness and go ahead with their kamikaze budget?”
Truss replied: “The way that we will get our country growing is through more jobs, more growth, more opportunities, not through higher taxes, higher spending, and his (Sir Keir’s) friends in the unions stopping hard-working people get to work.”
Since the September 23 mini budget the value of sterling has fluctuated and yields on government bonds, the cost of state borrowing, rose to such an extent that the Bank of England was forced to intervene to prevent problems for pension funds.
The Bank’s governor, Andrew Bailey, confirmed the intervention will end on Friday, leading to a slump in the pound and another spike in bond yields.
The UK 30-year yield on gilts, UK Government bonds, passed 5% on Wednesday morning amid growing unease among traders.
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Gilt yields, which rise as prices fall, have therefore returned close to the levels which led to the Bank’s initial intervention late last month.
Rees-Mogg argued it was the Bank’s interest rate decisions, rather than Kwarteng’s mini-budget, which had driven the market’s response in recent weeks.
But economists insisted that the Government’s decision to increase borrowing without any plan to balance the books was a major factor.
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