Prime Minister Liz Truss said she is "absolutely" not planning public spending cuts

Published: 13 October 2022

By Suzanne Evans, Director, Political Insight

Speaking during Prime Minister's Questions (PMQs) yesterday, Prime Minister Liz Truss said she is "absolutely" not planning public spending cuts, having been asked by Labour leader Sir Keir Starmer if she stood by the pledge she made during her leadership election, in which she said: "I'm not planning public spending reductions". She confirmed she would focus on reducing debt "not by cutting public spending but by making sure we spend public money well". Starmer again called for a reversal of what he called the “kamikaze” mini-budget, to which Truss responded by asking whether Labour wanted to reverse the government's support for energy bills. She added: "We are seeing interest rates rising globally in the face of Putin's appalling war in Ukraine. What we are making sure is that we protect our economy at this very difficult time internationally. As a result of our action - and this has been independently corroborated - we will see higher growth and lower inflation." Following PMQs, the prime minister's spokesman said there will be "difficult decisions" for the government regarding public spending, and that the Chancellor would announce measures "in due course". Later, while answering questions from MPs on the economic situation, Chief Secretary to the Treasury Chris Philp said there would be "no real term cuts" to public spending. "We do plan iron discipline when it comes to spending restraint," he added.

Britain's business minister Jacob Rees-Mogg said yesterday that the government had not shelved plans to deregulate parts of the economy, after a report in The Times claimed he and Prime Minister Liz Truss could not agree the detail on how to reignite economic growth by reforming planning rules, workers' rights and immigration, while cutting tens of billions of pounds of taxes.  Rees-Mogg said the plans remained on track. "We've got the big plans for deregulation that are continuing," he told Times Radio. "It's the cumulative effect of many detailed changes rather than one big bang."

Long-dated British government bonds sold off heavily on Wednesday to reach their lowest ebb in 20 years, the Reuters reports, after Bank of England Governor Andrew Bailey told pension funds they had just three days to fix liquidity problems. Twenty-and 30-year gilt yields spiked to their highest level since 2002, both exceeding 5.1% as the BoE insisted that its emergency bond market support will expire on Friday as originally announced. Although long-dated bond yields also rose in other countries yesterday, the move has been most severe in Britain, the news agency said.

Deutsche Bank’s chief UK economist Sanjay Raja told the Treasury select committee yesterday that he believed it was the government’s mini-budget that triggered recent financial turmoil. There is “absolutely a global component” to the issues, he said, but there is also an “idiosyncratic UK-specific component”. Raja said the “trade shock” due to Brexit is another factor and added: “You throw on the 23rd September event, you’ve got a sidelined financial watchdog, you’ve got lack of a medium-term fiscal plan, one of the largest unfunded tax cuts we’ve seen since the early 1970s, it was kind of the straw that broke the camel’s back.”

In its quarterly Financial Policy Summary report released yesterday, The Bank of England (BoE) warned that the number of UK households struggling to make mortgage payments could reach the same levels as in the 2008 financial crisis by the end of next year, if interest rates remain at current record highs. “The continued rise in living costs and interest rates will put increased pressure on UK household finances in coming months and make households more vulnerable to shocks,” it said. The BoE also said the global economic outlook has worsened significantly since July, with company earnings likely to come under strain because of the higher cost of credit. Higher costs and lower demand will weigh on the earnings for many businesses, especially those with large exposure to energy and fuel prices, it said.

Foreign secretary James Cleverly said yesterday that Britain wanted to have an even stronger trading relationship with India after The Times claimed that remarks made by Home Secretary Suella Braverman about Indian migrants overstaying in the UK were said to have left Indian officials “shocked and disappointed” and expressing “concerns” and “reservations” about a potential trade deal. Asked about her comments and the possible impact, Cleverly said: "We do want to have an even stronger, and it's strong already, but an even stronger trading, relationship with India." The Independent spoke subsequently to a government source at India’s Ministry of Commerce and Industry who dismissed the Times’ report. No one from the government or part of the Free Trade Agreement (FTA) team spoke to the newspaper as “negotiations are a delicate subject,” they said.

Industrial action by workers at the Port of Felixstowe in had not caused "any real significant impact" on supply chains, the Transport Select Committee was told yesterday by Paul Davey, head of corporate affairs at operator Hutchison Ports (UK). Davey said the slowdown in retail sales meant most of the port's customers already had enough stock for Christmas, while Covid and other issues meant customers had become used to dealing with delays. "The sense we got from our customers was while the strike wasn't welcome... they would deal with it like they've dealt with every other disruption," he said. Workers went on strike at the end of September for eight days, following a walkout in August. Unite wants Hutchison to grant a pay rise to match the rate of inflation - currently at about 10%. The port says its wage increase of 7% - plus £500 for 2022 - was "very fair".

Marks & Spencer is speeding up a shake-up of its stores down from five years to three. The move to better main stores, as shoppers spend more online, and the expansion of its food business, means it now aims to shut 67 of its bigger shops and open 104 new Simply Food stores in the next 36 months. Altogether, 110 main stores will be shut permanently, as announced by former CEO Steve Rowe. In a presentation to investors, the current M&S CEO Stuart Machin said the retailer aims to have 180 "full-line" shops selling food, clothing, and homeware products by early 2028, down from 247. He also said many of the Simply Food stores will reopen in the same area or location as sites earmarked for closure, but did not give details on which locations or how many jobs would be impacted.

Low-cost airline easyJet says it expects to report annual pre-tax losses of £170m -£190 million because of chaos across UK and European airports during the summer, when staff shortages led to cancellations amid surging post-pandemic demand. The company said it flew 88% of pre-Covid capacity in the fourth quarter, adding that it expects to fly around 20 million seats in the first quarter of 2023, a rise of a third year on year, with UK capacity during the peak travel periods, such as October half term and Christmas week, back to pre-pandemic levels.

London's Battersea Power Station reopens formally tomorrow as a swish new hub of offices, restaurants, shops, and apartments, its redevelopment having cost some £9bn. The once-derelict, colossal brick structure with four huge white chimneys, originally designed by architects J. Theo Halliday and Giles Gilbert Scott and built in the 1930s, originally supplied a fifth of London's electricity, including to Buckingham Palace and The Houses of Parliament, but it stopped generating electricity in 1975. Since then, four earlier development attempts failed. The iconic building is also known for featuring alongside a floating inflatable pig on the cover of Pink Floyd's 1977 album Animals and for being the scene of the final battle in the 1995 film Richard III staring Ian McKellen. Apple has made part of the building its new London HQ for some 1400 staff.  

Google will partner with Coinbase to drive Web3 innovation, including the use of the crypto exchange to accept payments for cloud services using bitcoin, ether, and dogecoin. The announcement was made during Google’s Cloud Next conference. According to a CNBC report, users will be able to pay for services using crypto from early 2023. Currently just a loose concept, the basic idea behind Web3 is to liberate the internet from ‘big tech’ to put more power in the hands of individuals who can share content and interact through decentralised networks, via blockchain technology. Central to the idea is the use of cryptocurrency for spending and sending money online instead of relying on bank and payment processor infrastructure. The idea was first floated by Ethereum co-founder Gavin Wood some 8 years ago.

Russians are selling roubles for cryptocurrency in an effort to evade sanctions and settle cross-border payments, money laundering expert Chen Limin, CFO and head of trading operations at the ICB Fund, has told Russian media outlet Izvestia.  According to a new report from blockchain analysis company Chainalysis, which says there has been a significant increase in rouble for crypto trades on over 100 cryptocurrency exchanges that serve Russia.

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