As UK’s Truss fights for a job, new finance minister says she made mistakes

  • Truss sacked finance minister on Friday
  • New Chancellor Hunt warns of tough decisions
  • “I listened, I understand,” says Truss
  • BoE’s Bailey says he agrees with Hunt on need to fix finances
  • Some conservative lawmakers say Truss will be ousted

LONDON, Oct 15 (Reuters) – Britain’s new finance minister Jeremy Hunt said on Saturday some taxes would rise and tough spending decisions were needed, saying Prime Minister Liz Truss had made mistakes as she was struggling to keep his 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.

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

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

“I listened, 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 currency.”

She said Hunt would present the “medium-term” national debt reduction plan at the end of the month.

But speculation over her future shows no sign of abating, with Sunday papers replete with stories that allies of Rishi Sunak, another former finance minister whom she beat to become leader last month, were plotting to force from here a few weeks.

During a tour of television and radio studios, Hunt gave a direct assessment of the situation facing the country, saying that Truss and Kwarteng had made mistakes and that further changes to his plans were possible.

“We will have very difficult decisions to make,” he said. “What people want, markets want, the country needs right now is stability.”

The Sunday Times said Hunt would further tear Truss’ initial package by delaying a planned reduction in the basic rate of income tax in a desperate attempt to balance the books.

According to the newspaper, Britain’s independent fiscal watchdog had said in a draft forecast that there could be a £72bn ($80bn) black hole in public finances by 2027/28, worse than economists had expected.

Truss had 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 already scrapped plans to cut taxes for high earners and said a levy on businesses would rise, dropping her proposal to keep it at current levels. But a plunge in bond prices after her Friday press conference still suggested she hadn’t gone far enough.

“MEETING OF SPIRITS”

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.

BoE Governor Andrew Bailey said he spoke to Hunt and they agreed on the need to clean up public finances.

“There was a very clear and immediate convergence of views between us on the importance of fiscal sustainability and the importance of taking steps to achieve it,” Bailey said in Washington on Saturday. “Of course there was an important step taken yesterday.”

He also warned that inflationary pressures may necessitate a bigger interest rate hike than previously thought due to the government’s huge energy subsidies for homes and businesses, and its plans to cut taxes. .

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 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, and some taxes will go up. So it’s going to be tough,” he said. He met with Treasury officials on Saturday and will meet with Truss on Sunday to review plans.

‘ERRORS MADE’

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, but added that their approach hadn’t worked.

“There have been mistakes made over the past few 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 won the support of less than a third of Conservative lawmakers and named his supporters since taking office, alienating those who supported his rivals.

The nomination of Hunt, who ran for party leader and later backed Sunak, was seen as a sign that she was reaching out, but the move did little to appease some of her party critics.

“It’s over for her,” a Tory MP 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

Our standards: The Thomson Reuters Trust Principles.

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