New finance minister Jeremy Hunt promised to win back Britain’s economic credibility by fully accounting for the government’s tax and spending plans, while insisting his boss Liz Truss remained in charge of the country.
Prime Minister Truss appointed Hunt on Friday in an attempt to rescue her leadership as confidence in her ability to run the country drained away within both her own Conservative Party and international financial markets.
Sunday’s newspapers were rife with stories of plans to replace her.
Investors have sold British government bonds heavily since September 23 when Hunt’s predecessor, Kwasi Kwarteng, announced a string of unfunded tax cuts without publishing a set of independent economic forecasts.
The knock-on effects forced the Bank of England into an emergency intervention to protect pension funds and drove up mortgage costs – adding to the squeeze on Britons’ finances.
“What I’m going to do… is to show the markets, the world, indeed people watching at home, that we can properly account for every penny of our tax and spending plans,” Hunt told BBC television in an interview broadcast on Sunday.
The first test for Hunt and Truss comes on Monday morning when trading in the battered bond market resumes without the support of the Bank of England’s bond-buying programme, which expired on Friday.
Britain’s economy is at risk of going into recession at the same time as the central bank is raising interest rates to control soaring inflation. Bank Governor Andrew Bailey said on Saturday he thought a big rate hike would be needed in early November.
Truss – who became Conservative Party leader just 41 days ago after promising to slash taxes – fired Kwarteng on Friday and has ditched key parts of the programme they agreed together.
The chaos has fuelled discontent in the governing party, already splintered before Friday and falling far behind the opposition Labour Party in opinion polls.
Three Conservative lawmakers on Sunday separately called for her resignation.
“In recent weeks, I have watched as the Government has undermined Britain’s economic credibility & fractured our party irreparably. Enough is enough,” lawmaker Jamie Wallis wrote on Twitter, publishing a letter to Truss asking her to resign.
His fellow Conservative Crispin Blunt told Channel 4’s “The Andrew Neil Show” that for Truss “the game is up, and it’s now a question as to how the succession is managed.”
A lawmaker on the committee which organises leadership contests said the rules, which protect Truss from a formal challenge for 12 months, could be changed if an “overwhelming majority” of Conservative lawmakers wanted that.
“I don’t think we’re anywhere near that at the present time,” Geoffrey Clifton-Brown, Treasurer of the 1922 Committee, told Sky News.
Even US President Joe Biden criticized Truss’s original economic plan as a mistake.
After effectively dismantling Truss’s gamble that tax cuts would spur economic growth and pay for public spending, Hunt has said he will go further, including imposing tighter spending controls and some tax rises.
“I’m going to be asking every government department to find further efficiency savings,” he said, adding that while he wanted to keep other tax cuts the government has promised, he ruled nothing out in his drive to balance the books.
He will set out details in a fiscal statement on October 31.
The Sunday Times said initial forecasts from the Office for Budget Responsibility showed a 72 billion pound ($80 billion) shortfall in the current plans. The paper also said Hunt would delay a planned cut to the basic rate of income tax.
The Treasury declined to comment on the report.
Asked if markets would have confidence in his plans, Hunt told the BBC: “Well, I think, you know, for people trading the markets, actions speak louder than words.”
Former Bank of England Deputy Governor Charlie Bean told Sky that events had taken their toll on Britain’s credibility, however.
“Basically we’ve moved from looking not too dissimilar from the U.S. or Germany as a proposition to lend, to looking more like Italy and Greece.”
‘THE PM IS IN CHARGE’
While Hunt seeks to fend off financial market pressure, Truss has to deal with mutiny from within her party.
Reports citing anonymous sources filled Sunday’s newspapers, with defence minister Ben Wallace touted as senior lawmakers’ preferred replacement by the Sunday Mirror, and Rishi Sunak – who Truss defeated last month in a leadership contest that balloted Conservative Party members – named as another possible successor by the Sun on Sunday.
Writing in the Sun, Truss admitted her plans had gone “further and faster than the markets were expecting”.
“I’ve listened, I get it,” she wrote. “We cannot pave the way to a low-tax, high-growth economy without maintaining the confidence of the markets in our commitment to sound money.”
Conservative lawmaker Robert Halfon said her initial plans had made the government look like “libertarian jihadists” who had treated the whole country as laboratory mice on which to carry out ultra-free-market experiments.
He told Sky that while he was not calling for her resignation now, things had to improve.
Hunt was asked whether, given the drastic policy change he has overseen, he was now effectively running the government.
“The prime minister is in charge,” he said. “She has changed the way we’re going to get there. She hasn’t changed the destination, which is to get the country growing.”