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Kwasi Kwarteng says UK borrowing will be higher to support energy crisis

New British Chancellor of the Exchequer Kwasi Kwarteng
Kwasi Kwarteng, UK's new chancellor of the exchquer, said UK 'faces extraordinary economic challenges in the coming weeks and months.' Photo: Reuters/Toby Melville (Toby Melville / reuters)

Kwasi Kwarteng, the new chancellor of the exchequer, has said the government’s priority is to support families and businesses, amid soaring inflation and the sharpest cost of living crisis in a century.

The newly-appointed finance minister, who previously led the business department, outlined that borrowing is set to be higher in the short term due to the scale of the gas crisis and rising energy bills.

This is while ensuring monetary stability and fiscal discipline over the medium term, he said.

He met bosses of 14 banks, insurers and investment houses on Wednesday, including HSBC (HSBA.L), NatWest (NWG.L), and Barclays (BARC.L), to set out the government’s new, pro-growth economic approach.


“We face extraordinary economic challenges in the coming weeks and months and I know that families and businesses across the UK are worried. The prime minister and I are committed to taking decisive action to help the British people now, while pursuing an unashamedly pro-growth agenda,” he said.

“We need to be decisive and do things differently. That means relentlessly focusing on how we unlock business investment and grow the size of the British economy, rather than how we redistribute what’s left.”

Read more: Liz Truss promises tax cuts and action on energy bills in first speech as PM

He added: “With a strong and resilient economy, we deliver more jobs, higher wages, and raised living standards – all while reducing our debt-to-GDP ratio in a fiscally sustainable way.”

The chancellor committed to “ensuring that the UK economy grows faster than debt, and that the government will keep debt as a proportion of the economy on a downward path.

He also gave his full support for the independent Bank of England and its monetary policy remit, and its mission to control inflation, which is central to tackling cost of living challenges.

Read more: Truss’s energy bills freeze could curb inflation, says Bank of England

Kwarteng stressed that the government will support the economy to grow. He recognised that the rate of growth has been too low and committed to a radical supply side agenda to deliver lasting economic growth.

This will mean “creating the right conditions for business investment and innovation, reducing burdensome regulation and taxes, which will in turn create jobs, wealth and drive economic growth.”

The chancellor reiterated his aim to get to 2.5% trend growth, delivering a stronger economy and a Britain that works for everyone.

A No 11 spokesperson said Kwarteng had emphasised that his “radical supply-side agenda” would also require “monetary stability and fiscal discipline”.

The finance minister also met Bank of England governor Andrew Bailey this afternoon. Kwarteng and the governor agreed that getting inflation under control quickly was "central to tackling cost of living challenges".

He updated Bailey on his growth and fiscal strategies, noting that reforms which create the conditions for a high-growth economy can help to alleviate inflationary pressures.

He also outlined the government’s plans to act this week in response to high energy prices, and reiterated that such action requires fiscal loosening in the short-term.

Both Kwarteng and Bailey agreed to re-instate weekly meetings – starting with bi-weekly meetings in the first instance - and coordinate closely to support the economy over the coming months.

Watch: How does inflation affect interest rates?