Conservative lawmaker Mark Field, who represents London’s financial district, said the government needs to reassure international markets about its commitment to deficit reduction after abandoning a planned tax increase.
Chancellor of the Exchequer George Osborne’s decision yesterday to scrap an increase in fuel duty that was due to take effect in August will cost the Treasury 550 million pounds ($860 million). The announcement came hours after official figures showed an unexpected increase in Britain’s budget deficit.
“I think the public are rightfully convinced that we are determined to reduce the deficit,” Field said in a telephone interview today. “But I have a bit of a sense that the markets may begin to take fright, that they may start to think that we are not entirely up for this.”
Yesterday’s figures showed the recession hit taxes and pushed up welfare spending in May, fueling concern that Osborne may miss his full-year budget deficit target. The shortfall widened to 17.9 billion pounds from 15.2 billion pounds a year earlier.
“The markets may think we are softening in our resolve, so we need to redouble that resolve to convince them we are serious in the coming months,” Field said.