Despite financial panic in the UK, Kwasi Kwarteng refuses to backtrack on his tax program

Can Liz Truss and Kwasi Kwarteng still hold on? Five days after the announcement of their tax program, the British Prime Minister and her Chancellor of the Exchequer have still not found the words to appease the financial markets. On Wednesday, the Bank of England was forced to intervene in the bond market, amid concerns for financial stability, particularly for the situation of pension funds.

Despite this alert, the government has sent no signal that it might back down. “We think our plan is the right one, because it will allow our economy to be more competitive,” said MP Andrew Griffith, Financial Secretary to the Treasury, on Sky News.

Kwasi Kwarteng held a meeting with City leaders, including representatives of American banks such as Citigroup, Morgan Stanley, JP Morgan and Bank of American, to whom he assured “his clear commitment to fiscal discipline”. Right in his boots, the British Minister of Finance has again undertaken to detail his budgetary plan, during the next forecasts of the OBR, the office in charge of budgetary forecasts, on 23rd November next.

Growing pressure

This date seems distant in view of the pressure that has increased on the British government. Turbulence on the markets has already led to a rise in rates which will increase the monthly payments of indebted households at variable rates. Not to mention the possible effects on pension funds, on which the pensions of many Britons depend.

In a rare intervention, the International Monetary Fund (IMF) asked London to revise its copy. “We do not recommend massive, untargeted fiscal plans at this stage, as it is important that fiscal policy does not run counter to monetary policy,” the institution said, adding that such measures “will likely increase inequalities. For its part, the Moody’s agency indicated that the announced tax cuts would have a negative impact on the UK’s debt, suggesting a downgrading of its rating.

Untenable status quo

The calls also came from leaders of large companies, like Shai Weiss, boss of Virgin Atlantic, who asked the government to “change course”. The current situation “weighs on consumers,” he added. Same reaction from the president of BT Group, Mike Rake. The latter is worried that this policy could “degrade our reputation and our economy. »

For Liz Truss, the status quo seems untenable. But a U-turn would seriously undermine its credibility. The Prime Minister was brought to power by Conservative party activists. His economic turn had not received the consent of voters as in a general election. Members of the House of Commons preferred Rishi Sunak, who had focused his speech on the serious budget. According to the “Financial Times”, some parliamentarians are asking for the head of the Minister of Finance, the only way out of this crisis according to them.

In this context, the debates promise to be eventful at the Conservative Party Congress to be held from Saturday in Birmingham. Rishi Sunak, after warning during the campaign about the risk of a crisis in the pound, announced that he would remain in his constituency of Yorkshire.