Britain’s new Finance Minister Jeremy Hunt leaving 10 Downing Street on October 14, 2022 (AFP/ISABEL INFANTES)
Britain’s new finance minister Jeremy Hunt on Monday warned of “very tough decisions ahead”, raising fears of a return to austerity after Prime Minister Liz Truss scrapped its suspended economic program.
After a series of humiliating reversals of her campaign promises, the days of the head of government seem numbered.
His new Chancellor of the Exchequer, who was hastily appointed on Friday after the market storm unleashed by his predecessor Kwasi Kwarteng’s “growth plan”, now holds the helm of government after weeks of market chaos that have threatened the country’s financial stability.
Without waiting, Mr. Hunt unveiled on Monday the main lines of the medium-term budget project which must be presented in full on October 31. Warning of “very harsh” decisions with future cuts in state spending and tax increases, a total disavowal of Liz Truss’s initial plan, he however assured that the government would make a priority of “the helping the most vulnerable”.
The presentation at the end of September of plans for massive tax cuts and colossal support for energy bills by Kwasi Kwarteng, not fully quantified and to be financed by borrowing, which had raised fears of a slippage in the public accounts.
The pound had fallen to an all-time low and long-term government borrowing rates had soared, undermining pension funds and pushing up borrowing rates for households and businesses in an already struggling UK economy. dish.
The Bank of England had to intervene to prevent the situation from deteriorating into a financial crisis and the Monetary Fund had called for a course correction.
Fueling questions about her tattered authority, Liz Truss sent Minister Penny Mordaunt, responsible for relations with Parliament, to respond to the opposition in the House of Commons.
The Prime Minister “is hiding without courage under her desk”, torpedoed Labor MP Stella Creasy.
The leader “humiliated simply cannot stay in her post”, insisted Angela Eagle, from the same political side.
British Prime Minister Liz Truss, during a press conference in Downing Street, October 14, 2022 (POOL/AFP/Archives/Daniel LEAL)
Ms Truss then appeared in Westminster alongside the Chancellor of the Exchequer but remained silent, staring blankly, as the latter faced heated opposition.
With only 40 days in power, she risks becoming the Prime Minister who has had the shortest term ever across the Channel.
“This is a crisis created by the Conservatives in Downing Street but ordinary people are paying the price,” castigated Rachel Reeves, Labour’s finance manager.
She asked why the government was not taxing energy producers to help finance budget support and said she feared the return of “austerity season 2” after the sweeping cuts of the 2010s.
Shell boss Ben van Beurden himself suggested ten days ago that governments tax energy companies more in the face of soaring profits in the midst of the energy cost crisis.
– Repair the damage –
Immediately signaling an easing in the markets, the pound jumped 2.18% to 1.1419 dollars around 4:15 p.m. GMT. The 30-year bond yield closed at 4.38%, down sharply from Friday but much higher than before Liz Truss took office.
Banknotes bearing the image of Queen Elizabeth on April 22, 2022 in London (AFP/Archives/Tolga Akmen)
Among Monday’s announcements, “the biggest expense”, the cap on energy bills for all households, will finally be in effect until April only and no longer for two years. Beyond that, the Treasury will think about a new “cheaper” approach while protecting “the most needy”.
In the long list of tax cuts that go to waste, Mr. Hunt listed the project of duty-free shopping centers for non-residents, the lowering of the tax rate for dividends .
A reduction in the tax rate on the income of the wealthiest had already been abandoned and a rise in corporation tax will finally take place.
Taken together, these tax measures “will raise around £32 billion a year,” Hunt said.
These announcements “will not be enough to plug the holes in the government’s budgetary plans” or to “repair the damage of the past few weeks”, warns the IFS think tank.
© 2022 AFP
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