As UK’s Truss fights for his job, new finance minister warns of tough decisions

LONDON, Oct 15 (Reuters) – Britain’s new finance minister Jeremy Hunt said on Saturday some taxes would rise and tough spending decisions were needed, signaling further U-turns from Prime Minister Liz Truss as ‘she’s fighting to keep her job just over a month later. term.

In a bid to appease financial markets which have been boiling for three weeks, Truss sacked Kwasi Kwarteng as Chancellor of the Exchequer on Friday and dropped parts of their controversial economic package. Read more

With disastrous opinion polls for the ruling Conservative Party and the Prime Minister personally, and many of her own lawmakers asking, not if, but how Truss should be removed, she turned to Hunt to help her. save his post as Prime Minister less than 40 days after taking office.

“We will have some very difficult decisions to make,” Hunt said as he toured TV and radio studios to give a direct assessment of the situation facing the country, saying Truss and Kwarteng had made mistakes .

“What people want, markets want, 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 afford our tax and spending plans and that will require some very tough spending and tax decisions.”

Truss won the leadership race to replace Boris Johnson on a platform of big tax cuts to boost growth, which Kwarteng duly announced last month. But the absence of any details on how the cuts would be financed sent markets crashing.

She has now scrapped plans to cut taxes for high earners and said a business levy would rise, dropping her proposal to keep it at current levels. But it’s unclear whether that’s gone far enough to satisfy investors. Read more

Hunt is due to announce the government’s medium-term fiscal plans on October 31, in what will be a key test of his ability to show he can restore credibility to his economic policy. He said other changes to Truss’ plans were possible.

“Giving certainty about public finances, how we’re going to pay every penny we receive through the tax and spending decisions we make, those are very, very important ways that I can provide certainty and help create stability,” he said. .

He warned that spending would not increase as much as people would like and that all departments were going to have to find more efficiency than they expected.

“Some taxes won’t come down as quickly as people want them to, and some taxes will go up. So it’s going to be difficult,” he said, adding that he would speak with Treasury officials on Saturday before speaking. meet Truss on Sunday to go through the plans.

‘ERRORS MADE’

Kwarteng’s September 23 budget statement provoked a backlash in financial markets that was so fierce that the Bank of England (BoE) had to step in to prevent pension funds from being caught up in the chaos as borrowing costs were rising.

Hunt, an experienced minister and seen by many in his party as a safe pair of hands, said he agreed with Truss’ fundamental strategy of reviving economic growth, adding that their approach had no not worked.

“There have been mistakes made in recent weeks. That’s why I’m sitting here. It was a mistake to reduce the top tax rate at a time when we’re asking everyone to make sacrifices,” did he declare.

It was also a mistake, Hunt said, to “fly blind” and produce the tax plans without allowing the independent tax watchdog, the Office for Budget Responsibility, to verify the figures.

That Hunt is Britain’s fourth finance minister in four months speaks to a political crisis that has gripped Britain since Johnson was ousted following a series of scandals.

Hunt said Truss should be judged in an election and on her performance over the next 18 months – not the last 18 days.

However, she might not be so lucky. During the leadership race, Truss has won the support of less than a third of Conservative lawmakers and has named his supporters since taking office, alienating those who support his rivals.

The appointment of Hunt, who ran for party leader and later backed her main rival, ex-finance minister Rishi Sunak, was seen as a sign that she was reaching out, but the move didn’t did little to appease some of his party critics.

“It’s over for her,” one of those conservative lawmakers told Reuters after Friday’s events.

The next key test will come on Monday, when the UK government bond market operates for the first time without the emergency buying support provided by the BoE since September 28. Gilt prices plunged Friday night after Truss’ announcement.

Newspapers said Truss’ position was in jeopardy, but with no appetite in the party or the country for another leadership election, it was unclear how she could be replaced. Read more

“Even Liz Truss’ staunchest allies, who view the case through the most rose-tinted glasses available, must now be wondering how she can survive,” said the tabloid Daily Mail, which had previously given support. solid to Truss, in his editorial.

“However, what is the alternative?”

Reporting by Michael Holden, Alistair Smout and William Schomberg Editing by Emelia Sithole-Matarise and Helen Popper

Our standards: The Thomson Reuters Trust Principles.