LONDON (Reuters) – Britain’s government must reform areas such as immigration and climate change to show it really can boost economic growth after it sent markets into a tailspin with a huge tax cuts announcement, the head of an employers group said on Wednesday.
“The markets’ reaction this week matters because the markets are lending us the money,” Tony Danker, director-general of the Confederation of British Industry, said in a speech before next week’s annual conference of the ruling Conservative Party.
“Every day, every week, every month, the government will now be critiqued by markets and businesses on how serious they are about growth and about their fiscal responsibility to pay back debt,” Danker said.
The British pound fell sharply and government bond yields soared after finance minister Kwasi Kwarteng announced a tax-slashing programme last Friday, forcing the Bank of England to announce a new temporary bond-buying plan on Wednesday.
Danker, speaking at the global offices of bank HSBC in London, welcomed Kwarteng’s target of increasing Britain’s economic growth rate to 2.5% a year but said concerns in the ruling Conservative Party about relaxing immigration rules or Britain’s net-zero commitments risked jeopardizing that goal.
“Growth must come before other Conservative doctrine. On immigration, the economy is clearly suffering from labour shortages,” he said. “On net zero, this is one of the golden opportunities of our age.”
Kwarteng said on Monday that he would make another budget statement on Nov. 23 to set out the government’s longer-term plans, alongside including new economic forecasts by the independent Office for Budget Responsibility.
(Reporting by Humza Jilani; Editing by William Schomberg)
