Jeremy Hunt arrives at his home in London after being appointed Chancellor of the Exchequer following Kwasi Kwarteng’s resignation. Picture date: Friday October 14, 2022.
Aaron Chown | Pa Pictures | Getty Images
Britain’s new Treasury Secretary Jeremy Hunt said on Saturday some taxes need to rise, signaling another abrupt policy reversal from Prime Minister Liz Truss, who is struggling to salvage her leadership after just over a month in office.
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.
In a hasty press conference shortly after Kwarteng was fired, Truss said the corporate tax rate would rise, abandoning her plan to keep it at current levels, and that government spending would rise less than previously planned.
Big, unfunded tax cuts were a key part of Truss’ original plans, but Hunt said tax increases are on the horizon.
“We’re going to have some very difficult decisions ahead of us,” he told Sky News.
“What the people want, who want markets, what the country needs right now is stability,” Hunt said. “No chancellor can control the markets. But what I can do is show that we can pay for our tax and spending plans, and that’s going to require some very difficult decisions, both in terms of spending and tax.”
Hunt is due to announce the government’s medium-term budget plans on October 31, a key test of its ability to show investors it can restore its economic policy credibility.
He said spending is not rising as much as people would like and all government agencies need 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.
Kwarteng’s Sept. 23 tax return sparked such a backlash in financial markets that the Bank of England had to step in to prevent pension funds from being caught up in the chaos as borrowing costs soared.
Hunt said he agrees with Truss’ basic approach to boosting economic growth, but the way she and Kwarteng have been doing it hasn’t worked.
“There were mistakes. It was a mistake when we called for tough tax and spending decisions across the board to lower the tax rate paid by the wealthiest,” he said.
“It was a mistake to fly blind and make these forecasts without giving people the confidence of the Office for Budget Responsibility that the totals are correct. The Prime Minister recognized that, that’s why I’m here.”
Truss was set to spend the weekend bolstering her flagging support within the Conservative Party, with newspapers citing lawmakers questioning her ability to stay in the job.
On Monday, the UK government bond market faces a test when it functions without the BoE’s emergency purchase support for the first time since September 28th. Gilt prices fell sharply late Friday after Truss’ news conference.
Comments are closed.