UK PM defends fiscal plans amid criticism, financial turmoil

LONDON - British Prime Minister Liz Truss on Thursday defended her government's fiscal statement announced last week, calling it "the right plan", amid wide criticism and huge financial market volatility.

"We had to take decisive action," and the measures were necessary to get the economy moving and deal with inflation," said Truss in her first media comments after the United Kingdom (UK) government on last Friday unveiled the largest tax cut package since 1972, which rattled markets.

Avoiding a projected economic slowdown meant it was important the government took action quickly, the prime minister said as she appeared across BBC local radio stations.

Over the past days, the fiscal plans have thrown markets into turmoil as the British pound collapsed and the government borrowing costs rose sharply. Investors are concerned that the policy will ramp up public borrowing, bring serious fiscal uncertainty and push up the already high inflation.

The International Monetary Fund (IMF) has openly criticized the UK government over its tax-cutting plans.

Given elevated inflation pressures in many countries, including the UK, "we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy," said the IMF.

Truss responded on Thursday that "There are many people with many different opinions but what I think nobody is arguing with is we had to take action with what is a very difficult economic situation," she said.

"It is important the UK is on the front foot, we are pulling all the levers we can to drive economic growth," she added.

The prime minister said the government is working closely with the Bank of England (BoE) on its fiscal plans, and the central bank does a "very good job" of looking after pensions.

The BoE on Wednesday announced temporary purchases of long-dated UK government bonds "on whatever scale is necessary" in an emergency move to restore orderly market conditions.