New Chancellor Jeremy Hunt indicated he would be tearing up the strategy that brought Truss to 10 Downing Street…reports Asian Lite News
Britain’s new finance minister, Jeremy Hunt, on Saturday warned of looming tax hikes as he admitted to “mistakes” made in a disastrous budget that still threatens to bring down Prime Minister Liz Truss.
New Chancellor Jeremy Hunt indicated he would be tearing up the strategy that brought Truss to 10 Downing Street.
“There were mistakes,” acknowledged Hunt, a former foreign secretary who is seen as a Tory centrist. He said former finance minister Kwasi Kwarteng and Liz Truss had erred in trying to cut taxes for the highest earners, and in presenting their budget without independent forecasts from the Office for Budget Responsibility.
“The prime minister’s recognised that, that’s why I’m here,” Hunt said.
Speaking to the BBC, Hunt signalled a big shift away from the economic policies of Truss and Kwarteng.
While he did not say where taxes could rise or public spending be reduced, Hunt did not rule out cuts to NHS spending or rowing back on Truss’s pledge to increase defence spending to 3% of GDP.
The chancellor, a Rishi Sunak supporter in the leadership contest, said the government needed to “show the world we have a plan that adds up financially”.
Truss, prime minister for just 39 days, is already facing pressure from within her party following September’s mini-budget, which included £45bn worth of tax cuts and sparked turbulence in the financial markets.
Hunt said Truss’s administration had made “mistakes”, adding: “It was wrong to cut the top rate of tax for the very highest earners at a time where we’re going to have to be asking for sacrifices from everyone to get through a very difficult period.”
And he also said it was wrong to “fly blind” and announce the mini-budget without a forecast from the Office for Budget Responsibility (OBR).
He said both of these were now in the process of “being put right”.
“Taxes are not going to come down by as much as people hoped, and some taxes will have to go up,” he said. “I’m going to be asking all government departments to find additional efficiency savings.”
According to media reports, in one of his first acts on taking office, hunt spoke to Bank of England governor Andrew Bailey, who has had to stage costly interventions to calm febrile bond markets.
Tax cuts were the centrepiece of the ill-starred budget announced by Kwarteng and Truss.
But they were financed through billions in more borrowing, causing panic on financial markets, which has fed into higher costs for British households in the middle of a cost-of-living crisis.
“We will have some very difficult decisions ahead,” Hunt said, warning that “all government departments” face spending restraint.
“And some taxes will not be cut as quickly as people want. Some taxes will go up,” he indicated.
Hunt confirmed he would deliver a new fiscal statement on October 31, telling BBC radio he had a “clean slate” to start afresh — underlining that Truss has considerably weakened her own position after coming to power on a hard-charging platform of reform.
According to British media reports, Liz Truss is desperately clinging to her chair. In a bid to survive the political crisis, Truss has ripped up the mini-budget that caused turmoil on financial markets and replaced Kwasi Kwarteng as chancellor with Conservative leader Jeremy Hunt. The cost of government borrowing rose and the pound fell further following her press conference announcing the changes.
The estimated GBP 45 billion worth of tax cuts without a detailed funding plan to back them up were seen as disastrous for the UK economy at a time when inflation was already soaring.
Meanwhile, Bank of England Governor Andrew Bailey said there had been a “meeting of minds” when he held discussions with Hunt on Friday.
Bailey made the comments after hinting at impending fresh interest rate hikes.
“Inflationary pressures” meant a “stronger response” could be needed from the Bank than previously thought in August, the governor said.
And the Institute for Fiscal Studies warned Mr Hunt had inherited a “difficult and tricky situation”, with the public finances “very stretched”.
The think tank’s director Paul Johnson said: “I think we’re going to see even further reversal of tax cuts that we’ve had, and in addition probably some very tight spending rounds.”
Despite Hunt’s appointment, Truss and her premiership remain under significant pressure.
One Tory MP described the party as being in a “state of despair,” but Truss supporter Christopher Chope said “time will tell” if she had done enough to secure her position.