As Britain’s Truss struggles to get a job, a new finance minister says she’s made mistakes

  • Truss fired his finance minister on Friday
  • New Chancellor Hunt warns against making tough decisions
  • “I listened, I understood,” Truss says.
  • Bank of England’s Bailey says he agrees with Hunt on the need to reform finances
  • Some conservative lawmakers say Truss will be ousted

LONDON (Reuters) – Britain’s new finance minister, Jeremy Hunt, said on Saturday that some taxes will rise and tough spending decisions are needed, saying Prime Minister Liz Truss has made mistakes as she struggles to keep her job after just over a month. term.

In an effort to appease financial markets that have been in turmoil for three weeks, Truss fired Kwasi Koarting as finance minister on Friday and scrapped parts of their controversial economic package.

With horrific poll ratings for both the ruling Conservative Party and the prime minister in person, and many of her MPs asking, not if, but how Truss should be removed, Truss is counting on Hunt to help salvage her premiership less than 40 days after taking office.

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In an article for The Sun newspaper published late on Saturday night, Truss admitted that the plans had gone “further and faster than markets had expected”.

She wrote: “I listened, I understood.” “We cannot pave the way for a low-tax, high-growth economy without maintaining market confidence in our commitment to making the right money.”

At the end of the month, she said, Hunt will draw up a plan to reduce the national debt “in the medium term.”

But speculation about her future shows no sign of abating, with the Sunday papers awash with stories that allies of Rishi Sunak, another former finance minister who won her to become leader last month, were planning to force her out within weeks.

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On a tour of the television and radio studios, Hunt gave a candid assessment of the situation the country faced, saying that Truss and Kwarting had made mistakes and that more changes could be made to their plans.

“We’re going to have some very difficult decisions ahead of us,” he said. “The thing that the people want, the markets want, and the country needs now, is stability.”

The Sunday Times said Hunt would rip more of the original Truss package by delaying a planned cut to the basic rate of income tax as part of a desperate attempt to balance the books.

According to the newspaper, Britain’s independent Financial Supervisory Authority said in a draft forecast that there could be a black hole worth 72 billion pounds ($80 billion) in public finances by 2027/28, worse than economists had predicted.

Truss won the leadership contest to replace Boris Johnson on a platform of deep tax cuts to stimulate growth, Kwarteng announced last month. But the absence of any details on how the cuts will be financed has sent markets crashing.

She has already given up plans to cut taxes on high-income earners, said the business tax would increase, and dropped her proposal to keep it at current levels. But the slide in bond prices after its press conference on Friday still indicated that it did not go far enough.

meeting of minds

Quarting’s financial statement on September 23 triggered a backlash in financial markets that was so fierce that the Bank of England (BoE) was forced to step in to prevent pension funds from falling into disarray as borrowing costs soared.

Bank of England Governor Andrew Bailey said he had spoken to Hunt and they both agreed on the need for fiscal reform.

“There was a very clear and immediate meeting of minds between us about the importance of financial sustainability and the importance of taking action to do that,” Bailey said in Washington on Saturday. “Of course, there was an important action taken yesterday.”

He also warned that inflation pressures may require a larger interest rate increase than previously thought due to the government’s massive energy subsidies for homes and businesses, and its plans to cut taxes.

Hunt is due to announce the government’s medium-term budget plans on October 31, in what will be a major test of his ability to demonstrate his ability to restore the credibility of his economic policy.

He warned that spending will not rise as much as people want and all government departments will have to find more talent than they had planned.

“Some taxes will not be reduced as quickly as people want and some taxes will rise. So it will be difficult,” he said. He met Treasury officials on Saturday and will hold talks with Truss on Sunday to discuss the plans.

mistakes made

Hunt, a seasoned minister who is seen by many in his party as a safe person, said he agreed with Truss’ basic strategy to get economic growth moving, but added that their approach had not worked.

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“There have been some mistakes in the last few weeks. That’s why I’m sitting here. It was a mistake to lower the highest tax rate at a time when we are asking everyone to make sacrifices,” he said.

It was also a mistake, Hunt said, to “evade” and release the tax plans without allowing the independent financial watchdog, the Office of Budget Responsibility, to check the numbers.

The fact that Hunt is the fourth British chancellor in four months is evidence of the political crisis that has gripped Britain since Johnson was ousted in the wake of a series of scandals.

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

However, you may not get this opportunity. During the leadership contest, Truss had the support of less than a third of conservative lawmakers and has appointed supporters since taking office – alienating those who backed her rivals.

The appointment of Hunt, who ran as leader and then backed Sunak, is seen as a sign of her extension, but the move did little to appease some of her party’s critics.

“It’s over for her,” a Conservative MP told Reuters after Friday’s events.

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Additional reporting by Michael Holden, Alistair Smoot and William Schomberg; Editing by Emilia Sithole Mataris, Helen Popper, Russell and Diane Kraft

Our criteria: Thomson Reuters Trust Principles.

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