Jeremy Hunt inherits power in the cabinet of an aimless Liz Truss, but who wants to continue?
Britain’s new Chancellor of the Exchequer, Jeremy Hunt, has announced that the government will have to make “difficult decisions about public spending, which cannot be increased as we wanted”, and that “the tax cut will not be as high as people expected and some will have to increase.” In this way it tries to calm the reaction of the capital markets in the coming days.
Less than 24 hours after his appointment, Hunt confirms the radical shift in the priorities of the Liz Truss government. The Prime Minister and her new head of the Treasury will meet this Sunday to coordinate the presentation of a 15-day budget that offers a horizon of stability, following the implosion of Truss’s plans in the early days of his mandate.
The conservative leader won party votes in September by promising to repeal the corporate tax hike and other health and social assistance spending for the elderly introduced by her rival, Rishi Sunak. On Friday, he confirmed that he will keep the first – from 19% to 25% – and is now expected to do the same with all the others.
Truss and Kwasi Kwarteng, his friend and fellow believer, made a mini-budget that delivered on his election promise and added more budget cuts. They presented it on September 23, along with a huge government subsidy of energy prices. Markets reacted strongly to doubts about British government finances.
Kwarteng’s resignation as finance minister and the abandonment of the repeal of the corporate tax hike did not satisfy stock markets, which responded to Truss’ attempt to appease them by lowering the pound parity and price of government bonds. The market’s reaction to the new minister’s words will measure the government’s room for maneuver.
The mini-budget was raising its ideological flag, based on the belief that cutting taxes and removing regulations that hinder business are key pillars to boost growth in the UK economy. It was the crystallization of an economic doctrine and an ideal of Brexit, attracting investment towards a freer system, a ‘Singapore on the Thames’.
They warned the Bank of England to focus on growth. Kwarteng fired the top official in his ministry, whom he and Truss blame for stagnating productivity. They also rejected the customary publication of the Office of Budget Responsibility assessments of the impact of the tax measures adopted by the Executive.
Truss acknowledged Friday that “some parts of the mini-budget went too far and too fast for the markets.” The Institute for Fiscal Studies estimated the fiscal gap in the government’s accounts at about 70,000 million euros. Friday’s decisions reduce it to 45,000. Hunt has to find them in tax hikes and budget cuts.
The new head of the Treasury, son of a Commander in Chief of the British Navy and NATO’s Atlantic Fleet, is the politician longest in charge of public health, serving as Secretary of State before being defeated by Boris Johnson in the conservative election to replace Theresa May. He was eliminated in the first round of the group’s campaign to replace Johnson. He then promised to lower the corporate tax rate to 15%.
Truss’ fate is a matter of speculation. On Friday, he claimed his continuity for the decisions he had made to end the crisis. But the chaos it has caused and its consequences have undermined confidence in its ability and consistency, even in the most favorable press. “How much can we bear, she and the others,” says the Daily Mail on its front page, along with a photo of the prime minister.
The faction speculates about the right time to replace her, bearing in mind the additional damage an overthrow would inflict on a party that believes this is the end of a conservative era. Hunt’s appointment seems to guarantee that he will survive at least until the budget presentation on October 28. Maybe until the end of the year. But Truss has lost purpose and power.
Source: La Verdad
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