The government of new British Prime Minister Liz Truss on Monday came under pressure after the pound hit a record low against the dollar following last week’s huge tax-cutting budget.
The main opposition Labour party lambasted Truss for the massive spending plans, which some economists warn could further fuel inflation.
Labour’s finance spokeswoman Rachel Reeves described the situation as a “national emergency” and likened Truss and her chancellor of the exchequer Kwasi Kwarteng to “two desperate gamblers in a casino chasing a losing run”.
“The message from financial markets was clear on Friday and this morning that message is even more stark: sterling is down. That means higher prices, as the costs of imports rise,” she said.
“The cost of government borrowing is up. That means that more taxpayers money will go into paying the interest on our government debt.
“And in turn that means the cost of borrowing for working people will now go up to with higher mortgage repayments,” she told Labour’s annual conference in Liverpool, northwest England.
Britain has been facing a cost-of-living crisis with soaring energy prices coupled with inflation and wage stagnation.
Kwarteng was appointed finance minister by Truss earlier this month after she took office following a leadership battle to replace Boris Johnson as head of the ruling Conservative party.
On Friday Kwarteng unveiled a multi-billion-pound package to support households and businesses.
He also slashed taxes, bringing forward a plan to cut the lowest rate of income tax and reducing the highest to 40 percent from 45 percent to kickstart the economy.
But investors were spooked by the huge amount of borrowing likely needed for the package, which critics said would benefit the rich far more than the poorest hit by the cost-of-living crisis.
The cost of the energy support measures alone have been calculated at £60 billion ($65 billion) for only six months.
But economists estimate the whole tax package at between £100-200 billion.
The pound on Monday struck an all-time low at $1.0350 before regaining some ground to stand at $1.0728 around 1115 GMT.
The pound had already suffered a series of 37-year lows against the greenback this month on UK recession fears propelled by high inflation.