As Britain’s truss struggles to find a job, the new finance secretary says she made mistakes
- Truss fired the Treasury Secretary on Friday
- The new Chancellor Hunt warns against tough decisions
- “I was listening, I understand,” says Truss
- BoE’s Bailey says he agrees with Hunt on need to get finance in order
- Some conservative lawmakers say Truss will be ousted
LONDON (Reuters) – Britain’s new finance secretary Jeremy Hunt said on Saturday some taxes would rise and tough spending decisions were needed, saying Prime Minister Liz Truss made mistakes as she struggled to keep her job after just over a month keep term.
In an attempt to calm financial markets that have been in turmoil for the past three weeks, Truss on Friday sacked Kwasi Kwarteng as her Chancellor of the Exchequer and scrapped parts of her controversial economic package.
With poor opinion polls for both the ruling Conservative Party and the Prime Minister personally, and many of her own lawmakers asking not if Truss should be removed but how, Truss is counting on Hunt to help her win her premiership less than 40 Days later to save taking office.
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In an article for the Sun newspaper published late Saturday, Truss admitted the plans had progressed “further and faster than markets expected.”
“I was listening, I understand,” she wrote. “We cannot pave the way to a low-tax, high-growth economy without maintaining market confidence in our commitment to sound money.”
She said Hunt would present the plan to cut the national debt “medium term” later this month.
But speculation about her future doesn’t seem to be abating as Sunday’s newspapers are rife with stories that allies of Rishi Sunak, another former finance minister she defeated last month to take her leadership, plotted to oust her within weeks .
Touring television and radio studios, Hunt gave a candid assessment of the country’s situation, saying Truss and Kwarteng had made mistakes and that further changes to their plans were possible.
“We will have some very difficult decisions ahead of us,” he said. “What the people want, the markets want, the country needs now is stability.”
The Sunday Times said Hunt would tear up more of Truss’ original package by delaying a planned property tax rate cut as part of a desperate bid to balance the books.
According to the newspaper, Britain’s independent financial watchdog had said in a draft forecast that there could be a £72 billion ($80 billion) black hole in public finances by 2027/28, worse than economists had predicted.
Truss had won the leadership contest to replace Boris Johnson on a platform of big tax cuts to spur growth, which Kwarteng duly announced last month. But the lack of any details on how the cuts would be funded sent markets into meltdown.
She has already dropped plans to cut taxes on high earners, saying a levy on companies would increase and scrapped her proposal to keep it at current levels. However, a slump in bond prices after her Friday press conference still suggested she hadn’t gone far enough.
‘MEETING OF MINDS’
Kwarteng’s Sept. 23 tax return sparked such a backlash in financial markets that the Bank of England (BoE) had to step in to prevent pension funds from being caught up in the chaos as borrowing costs soared.
British Prime Minister Liz Truss attends a news conference in London, Britain, on October 14, 2022. Daniel Leal/Pool via REUTERS
BoE Governor Andrew Bailey said he spoke to Hunt and they agreed on the need for public finance restructuring.
“There was a very clear and immediate disagreement between us about the importance of fiscal sustainability and the importance of taking action on it,” Bailey said in Washington on Saturday. “Of course, an important measure was taken yesterday.”
He also warned that inflationary pressures could require a larger rate hike than previously thought due to the government’s huge energy subsidies for households and businesses and its tax cut plans.
Hunt is due to announce the government’s medium-term budget plans on October 31, which will be a key test of its ability to show it can restore its economic policy credibility.
He warned that spending would not increase as much as people would like and that all government departments would have to find more efficiencies than they planned.
“Some taxes won’t go down as fast as people want, and some taxes will go up. So it’s going to be difficult,” he said. He met with Treasury Department officials on Saturday and will hold talks with Truss on Sunday to go through the plans.
“Made fault”
Hunt, a veteran minister who is viewed by many in his party as a safe couple, said he agreed with Truss’ basic strategy to boost economic growth, but added that their approach had not worked.
“Some mistakes have been made in the past few weeks. That’s why I’m sitting here. It was a mistake to lower the top tax rate at a time when we’re asking everyone to make sacrifices,” he said.
It’s also a mistake, Hunt said, to “fly blind” and create the tax plans without allowing the independent tax regulator, the Office for Budgetary Responsibility, to check the numbers.
The fact that Hunt has become Britain’s fourth finance secretary in four months is a testament to a political crisis that has gripped Britain since Johnson was ousted following a series of scandals.
Hunt said Truss should be judged on an election and her performance over the next 18 months – not the last 18 days.
But she might not get that chance. During the leadership contest, Truss won the support of less than a third of Conservative lawmakers and has named her supporters since taking office – angering those who backed her rivals.
The appointment of Hunt, who himself ran for chairman and then supported Sunak, was taken as a sign that she was reaching out, but the move did little to mollify some of her party critics.
“It’s over for them,” a Conservative lawmaker told Reuters after Friday’s events.
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Reporting by Michael Holden, Alistair Smout and William Schomberg Editing by Emelia Sithole-Matarise, Helen Popper, Ros Russell and Diane Craft
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