LONDON (Reuters) – British finance minister Jeremy Hunt took aim at the economic plans of former prime minister Liz Truss on Wednesday, saying they had shown why tax cuts should not be funded out of increased government borrowing.
In September, Truss outlined hefty tax cuts to drive a dramatic increase in British economic growth, which she promised would pay for a rapid increase in government borrowing.
Investors took fright, sparking a fire-sale of British government bonds, amplified by the financial structure of pension funds.
In a parliamentary hearing on Wednesday, Hunt criticised the foundations of Truss’s plans, the failure of which led to his installation as finance minister and Rishi Sunak as a replacement prime minister.
“In particular I think it’s clear you can’t fund tax cuts through increased borrowing. That is a clear thing that we changed course on,” Hunt said.
A spokesman for Truss said Hunt, a fellow Conservative, had made mistakes of his own.
“Liz was always clear that you can’t deliver economic growth and thus reduce borrowing by hiking taxes,” the spokesman said.
“Raising Corporation Tax from 19% to 25% looks like a pretty bad mistake right now when you consider how a firm like AstraZeneca is locating its new plant in Ireland where Corporation Tax is half the rate now being levied by the British Government.”
Sunak’s divided Conservative Party sits about 15 to 20 points behind the opposition Labour Party ahead of an expected election next year, according to most opinion polls.
(Reporting by William James and Elizabeth Piper, writing by Andy Bruce; Editing by Kate Holton)
