UK economic strategy is ‘cautionary tale’, says top Joe Biden official

The UK government’s radical economic strategy is a “cautionary tale”, said a senior member of Joe Biden’s cabinet in scathing remarks about prime minister Liz Truss’s plan.

US commerce secretary Gina Raimondo said cutting taxes and deregulation was a “failed economic theory” that would lead to lower growth and greater inequality.

Ms Raimondo said it was “hard to see” how Ms Truss’s new government was taking inflation seriously, and insisted that the US was talking a quite different approach.

Asked if she would look at the turmoil in Britain as a cautionary tale, the US commerce chief said: “Yes … these policies are brand new. From where I sit, I don’t know how this story’s going to end. I would just simply say, we’re pursuing a different strategy.”

Speaking at an event organised by The Hamilton Project at Brookings, Ms Raimondo said: “You say, ‘Is it a cautionary tale?’ I mean, the markets have plummeted. The pound has plummeted. It’s early going for that new strategy, but it’s not the one we are pursuing.”

It follows the Mr Biden’s attack on “trickle-down economics” shortly before meeting Ms Truss in New York last week. No 10 had claimed it was “ludicrous” to suggest the US president’s remarks were aimed at the PM.

On Mr Biden’s economic strategy, Ms Raimondo added: “The president, every time you talk to him, he talks about: you got to pay for what you’re spending and he believes in that.”

She said the US government was “taking inflation seriously, letting the Fed do its job, watching deficit spending, reducing deficits”.

It follows critical remarks by White House economic adviser Brian Deese, who said on Wednesday that he was not surprised by the negative reaction of financial markets to the UK’s tax cuts and borrowing plans.

The top Biden adviser – director of the White House National Economic Council – said it underscored the need to maintain “fiscal prudence, fiscal discipline”.

Former US Treasury secretary Larry Summers has been scathing about the “utterly irresponsible” policies pursued by Ms Truss and her chancellor Kwasi Kwarteng.

The senior figure – who advised presidents Bill Clinton and Barack Obama – said the markets were treating Britain like a developing country where “credibility” is lost.

On Thursday morning Ms Truss has insisted that her government’s borrowing-fuelled tax-cutting measures remained the “right plan” – and claimed it was “simply not true” that it was a “reverse Robin Hood” plan that benefited the rich.

The PM also suggested Russia was to blame for the current economic turmoil in the UK, telling BBC Radio Bristol that Britain faced “a very, very difficult economic global situation because of the war Vladimir Putin has been perpetrated in Ukraine”.

Labour and the Liberal Democrats have called for the recall of parliament, while some Tory MPs have suggested Ms Truss would have to sack Mr Kwarteng.

One former minister told The Independent that Mr Kwarteng may still be forced into a humiliating backtrack on his cut to the 45p income tax rate for high earners.

Former Bank of England governor Mark Carney said the Truss government has been “undercutting” the UK’s economic institutions with the borrowing-fuelled tax cut spree, saying the measures were “working at some cross-purposes” with the Bank.

Even Gerard Lyons – the right-wing economic advisor to Ms Truss’s campaign who has influenced “Trussonomics” – criticised Mr Kwarteng for failing to prepare the markets about his mini-Budget tax measures.

“Ahead of the mini-budget, it was necessary for the chancellor to keep financial markets on-side – and I warned about the need for him to do this,” he told BBC Newsnight. “One key group he failed to keep on-side was the financial markets.”