© Reuters. FILE PHOTO: New Exchequer Chancellor Jeremy Hunt leaves No. 10 Downing Street in London, Britain, October 14, 2022. REUTERS/Henry Nicholls/File Photo
By William James and William Schomberg
LONDON (Reuters) – New Finance Secretary Jeremy Hunt promises to regain Britain’s economic credibility by fully accounting for government spending and tax plans, while insisting his boss Liz Truss remains take control of the country.
Prime Minister Truss appointed Hunt on Friday in an attempt to salvage her leadership as confidence in her ability to run the country has dried up in both her own Conservative Party and the markets. international finance.
Sunday’s papers were rife with stories of plans to replace her.
Investors have been selling heavily in UK government bonds since September 23 when Hunt’s predecessor, Kwasi Kwarteng, announced a series of unfinished tax cuts without releasing a set of economic forecasts. independence.
The blows have forced the Bank of England to intervene urgently to protect pension funds and drive up mortgage costs – further tightening Britons’ finances.
“What I’m going to do… is show the market, the world, really the people watching at home, that we can calculate every penny of our tax planning and spending,” Hunt said. told BBC television in an interview. on Sunday.
The UK economy is at risk of going into recession at the same time that the Bank of England is raising interest rates to control soaring inflation. Bank Governor Andrew Bailey on Saturday said he thinks a big rate hike will be needed in early November.
Truss – who became Conservative Party leader just 41 days ago after promising tax cuts – fired Kwarteng on Friday and gave up key parts of the program they had agreed to.
The chaos has fueled discontent in the ruling party, which was split before Friday and lagged far behind the opposition Labor Party in opinion polls.
Crispin Blunt on Sunday became the first Conservative lawmaker to publicly say Truss cannot survive as leader,
“I think the game is over and now it’s a question of how to manage succession,” he told Channel 4’s ‘The Andrew Neil Show’.
Blunt did not say how such a change could happen, but that if enough parties wanted it, they would find a way.
Even US President Joe Biden criticized Truss’ original economic plan as a mistake.
“I think the idea of tax cuts for the super-rich comes at a time when – anyway, I just think – I don’t agree with this policy, but that’s being put forward by the UK, not me.” , he said.
After effectively breaking Truss’ gamble that tax cuts would boost economic growth and pay for public spending, Hunt said he would go further, including imposing controls. tighter spending and several tax hikes.
“I would ask every government agency to find ways to save more efficiently,” he said, adding that although he wanted to keep the other tax cuts promised by the government, he did not rule out the possibility. book balance.
He will detail it in a financial statement on October 31.
The Sunday Times reports that initial projections from the Office for Budget Responsibility show a shortfall of 72 billion pounds ($80 billion) in the current plan. The newspaper also said Hunt would delay the planned base tax rate cut.
The Treasury declined to comment on the report.
Asked if the markets had confidence in his plan, Hunt told the BBC: “I think, you know, for those who trade in the markets, actions speak louder than words. “
A first test will take place on Monday morning as trading in Britain’s swapped government bonds resumes without the support of the Bank of England’s emergency bond-buying programme, which has already expires on Friday.
“We’ve basically moved from a loan proposal that’s not too different from the US or Germany, to more like Italy and Greece,” former Bank of England deputy governor Charlie Bean told Sky.
While Hunt manages to fend off financial market pressure, Truss must deal with a mutiny from within her party.
Reports citing anonymous sources flooded the newspapers on Sunday, with Defense Secretary Ben Wallace being introduced by the Sunday Mirror as a preferred replacement for senior lawmakers and Rishi Sunak – whom Truss has appointed as the preferred replacement for senior lawmakers. defeated last month in a leadership contest by a vote of Conservative Party members – named as another possible successor by the Sun on Sunday.
Writing in The Sun, Truss admitted her plan had gone “further and faster than the market expected”.
“I listened, I understood,” she wrote. “We cannot pave the way to a low-tax, high-growth economy without upholding market confidence in our commitment to creating sound currency.”
Conservative lawmaker Robert Halfon said her early plans made the government look like “liberal jihadists” who saw the whole country as lab rats. free market hypermarket experiments.
He told Sky that although he is not calling for her to resign now, things must improve.
Hunt was asked whether, with the dramatic policy change he has overseen, he is running the government effectively.
“The prime minister is in power,” he said. “She changed the way we’re going to get there. She didn’t change the destination, it’s to make the country grow.”
(1 dollar = 0.8953 pounds)