LONDON: Britain’s new government said on Wednesday it would not reverse its vast tax cuts or reduce public spending as it sought to stand firm in the face of yet more turmoil in financial markets and concerns over its change in economic policy.

British financial markets have been under strain since Sept 23 when finance minister Kwasi Kwarteng announced 45 billion pounds ($50 billion) of tax cuts, without saying how they would be paid for.

The Institute of Fiscal Studies think-tank has said the strategy will require 62 billion pounds of spending cuts or tax rises to stop the public debt growing - a daunting proposition after more than a decade of tight government spending.

“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,” Truss told parliament.

The 47-year-old former foreign secretary was elected last month by members of her party, and not the broader electorate, on a promise to snap the economy out of years of stagnation by cutting taxes and reforming parts of the economy such as planning, migration and childcare.

But markets have taken fright at the tax cuts and the government’s earlier criticism of “Treasury orthodoxy”, driving up borrowing costs and mortgage rates, and forcing the Bank of England to intervene to buy long-dated government bonds.

Earlier, Truss’s business secretary said the government was still committed to economic reforms after the Times reported that it was struggling to agree on new policies.

With borrowing costs rising again on Wednesday after Bank of England governor Andrew Bailey said that the market support would end on Friday, Truss was asked if she remained committed to an earlier pledge to maintain spending levels.

Published in Dawn, October 13th, 2022