The UK’s Treasury department will make some “very difficult decisions ahead,” new Chancellor of the Exchequer Jeremy Hunt said on Saturday as he alluded to tax rises and spending cuts.
In this first interview as the chancellor following the dramatic sacking of his predecessor Kwasi Kwarteng, Hunt said he would demonstrate the government’s fiscal credibility by making “some very difficult” tax and spending decisions in a bid to stabilize the financial market.
“The thing that people want, the markets want, the country needs now is stability. No Chancellor can control the markets. But what I can do is show that we can pay for our tax and spending plans and that is going to need some very difficult decisions on both spending and tax,” the chancellor told Sky News.
Hunt said spending will not “rise by as much as people would like,” appearing to allude to the ongoing debate over whether benefits should rise by the rate of wage increase or inflation.
“All government departments are going to have to find more efficiencies than they were planning to,” he said. ”And some taxes will not be cut as quickly as people want. Some taxes will go up. So it’s going to be difficult.”
Seeking to calm the fear of austerity, Hunt said the government’s priority is to “protect families, businesses, who are going through a very challenging time,” adding, ”This is a compassionate Conservative government.”
Hunt commended his predecessor for his £65 billion energy price guarantee package that subsidised the skyrocketing cost of household and business energy bills, saying it’s “very important to families up and down the country.”
He added that Kwarteng and Prime Minister Liz Truss had made “mistakes” by cutting the top rate of income tax—a £2 billion cut Kwateng was forced to abandon—and making the “mini-budget” announcement without a forecast from the Office for Budget Responsibility.
Following a market meltdown; the fierce backlash to the government’s mini-budget from Conservative MPs and opposition parties; and pressure from financial institutions including the International Monetary Fund, Truss was forced to sack Kwarteng on Friday night and backtrack on her major campaign promise by reinstating former chancellor Rishi Sunak’s policy to hike corporation tax from 19 percent to 25 percent in April.
During her leadership campaign against Sunak, Truss said the planned rise would undercut the UK’s competitiveness and prevent economic growth, resulting in lower tax revenue.
Asked if the growth-driven “Trussonomic” is dead, Hunt said the fundamental strategy to solve the growth paradox is “absolutely right” if the UK wants to have both low taxes and “well-funded public services like the NHS.”
Political Crisis
The UK’s market turmoil comes amid global market volatility as countries move away from a decade-long policy of cheap money.But the fact that Hunt is Britain’s fourth finance minister in four months is a testament to a political crisis that has gripped Britain since Johnson was ousted following a series of scandals.
Hunt said Truss should be judged at an election and on her performance over the next 18 months—not the last 18 days.
However, she might not get that chance. During the leadership contest, Truss won support from less than a third of Conservative lawmakers and has appointed her backers since taking office—alienating those who support her rivals.
The appointment of Hunt, who ran to be leader himself and then backed her main rival Sunak, has been seen as a sign of her reaching out, but the move did little to placate some of her party critics.
Newspapers said Truss’s position was in jeopardy, but with no appetite in the party or country for another leadership election, it was unclear how she could be replaced.
