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

LONDON, Oct 15 (Reuters) – Britain’s new Chancellor of the Exchequer Jeremy Hunt said on Saturday some taxes would go up and tough spending decisions would be needed, signaling further shifts from Prime Minister Liz Truss as she fights for keep your job a little over a month later. finished.

In a bid to appease financial markets that have been in turmoil for three weeks, Truss fired Kwasi Kwarteng as his finance minister on Friday and scrapped parts of his controversial economic package. read more

With dire opinion poll ratings for both the ruling Conservative Party and the prime minister personally, and many of her own lawmakers asking, not if, but how Truss should be removed from office, she turned to Hunt to help save her job from office. prime minister less than 40 days later. take office.

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

“What the people want, the 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 taxes and spending plans and that will require some very difficult decisions on both spending and taxes.”

Truss won the leadership contest to replace Boris Johnson on a platform of big tax cuts to spur growth, which Kwarteng duly announced last month. But the absence of details on how the cuts would be financed caused the markets to collapse.

He has now abandoned plans to cut taxes for high earners and said he would raise a corporate tax, abandoning his proposal to keep it at current levels. But it’s not clear whether that has gone far enough to satisfy investors. read more

Hunt is due to announce the government’s medium-term budget 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 further changes to Truss’s plans were possible.

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

He warned that spending would not increase as much as people would like and that all government departments would have to find more efficiencies than they were planning for.

“Some taxes are not going to go down as fast as people want, and some taxes are going to go up. So it’s going to be tough,” he said, adding that he will sit down with Treasury officials on Saturday before meeting with Truss on Sunday to discuss plans. .

‘MADE MISTAKES’

Kwarteng’s tax return on September 23 sparked 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 costs rose. of the loans.

Hunt, an experienced minister seen by many in his party as a safe pair of hands, said he agreed with Truss’s fundamental strategy of boosting economic growth, adding that his approach had not worked.

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

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

The fact that Hunt is Britain’s fourth finance minister in four months is testament 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 may not get that chance. During the leadership race, Truss won the support of less than a third of Conservative lawmakers and has appointed her patrons since she took office, alienating those who support her rivals.

The appointment of Hunt, who ran for leader himself and later endorsed his main rival, former finance minister Rishi Sunak, has been seen as a sign he was getting closer, but the move did little to placate some of the critics of his party.

“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 functions for the first time without the emergency buying support provided by the BoE since September 28. Gilt prices plunged on Friday after Truss’s announcement.

Newspapers said Truss’s 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’s staunchest allies, who view the matter through the rosiest of glasses available, must now ask how she can survive,” the Daily Mail tabloid, which had previously strongly supported Liz Truss, said in its editorial. Truss.

“However, what is the alternative?”

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

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