NEW UK Finance Minister Jeremy Hunt promised to win back Britain’s economic credibility by fully accounting for the Government’s tax and spending plans while insisting his boss Liz Truss remained in charge of the country.
Prime Minister Truss appointed Hunt on Friday in an attempt to rescue her leadership as confidence in her ability to run the country drained away within both her own Conservative Party and international financial markets.
Sunday’s newspapers were rife with stories of plans to replace her.
Investors have sold British government bonds heavily since Sept 23 when Hunt’s predecessor, Kwasi Kwarteng, announced a string of unfunded tax cuts without publishing a set of independent economic forecasts.
The knock-on effects forced the Bank of England (BOE) into an emergency intervention to protect pension funds and drove up mortgage costs – adding to the squeeze on Britons’ finances.
“What I’m going to do… is to show the markets, the world, indeed people watching at home, that we can properly account for every penny of our tax and spending plans,” Hunt told BBC television in an interview broadcast on Sunday.
The first test for Hunt and Truss comes on Monday morning when trading in the battered bond market resumes without the support of BOE’s bond-buying programme which expired on Friday.
Britain’s economy is at risk of going into recession at the same time as the central bank is raising interest rates to control soaring inflation. Bank Governor Andrew Bailey said on Saturday he thought a big rate hike would be needed in early November.
Truss – who became Conservative Party leader just 41 days ago after promising to slash taxes – fired Kwarteng on Friday (Oct 14) and has ditched key parts of the programme they agreed together.
The chaos has fuelled discontent in the governing party, already splintered before Friday and falling far behind the opposition Labour Party in opinion polls. Three Conservative lawmakers on Sunday separately called for her resignation.
Even US President Joe Biden criticised Truss’s original economic plan as a mistake.
After effectively dismantling Truss’s gamble that tax cuts would spur economic growth and pay for public spending, Hunt has said he will go further, including imposing tighter spending controls and some tax rises.
“I’m going to be asking every government department to find further efficiency savings,” he said, adding that while he wanted to keep other tax cuts the government has promised, he ruled nothing out in his drive to balance the books.
He will set out details in a fiscal statement on Oct. 31.
The Sunday Times said initial forecasts from the Office for Budget Responsibility showed a 72 bil pound (RM380 bil) shortfall in the current plans. The paper also said Hunt would delay a planned cut to the basic rate of income tax. – Oct 17, 2022