Jeremy Hunt tears up Truss economic agenda

Jeremy Hunt has warned of looming tax hikes as he dramatically reversed course on the Tory Prime Minister’s radical economic reform program.

Jeremy Hunt leaves 10 Downing Street after his appointment on Friday. Picture: Getty Images

Britain’s new Chancellor of the Exchequer, Jeremy Hunt, has warned of looming tax hikes as he dramatically reversed course on Tory Prime Minister Liz Truss’s radical program of economic reform.

Senior Conservative MPs were reportedly plotting to unseat Ms Truss, possibly within days, aghast at the party’s collapse in opinion polls since she replaced Boris Johnson on September 6.

In their Sunday editions, the Times and Telegraph newspapers reported that Mr Hunt was planning to delay a planned cut on the basic rate of income tax, enforcing yet another humiliating climb-down on Ms Truss after she sacked Kwasi Kwarteng as Chancellor of the Exchequer on Friday.

In crisis talks on Sunday at the Prime Minister’s country retreat, Mr Hunt and Ms Truss were to thrash out a new budget plan which he is due to deliver on October 31, a month after Mr Kwarteng’s botched attempt to drive through a slew of unfunded tax cuts.

“There were mistakes,” acknowledged Mr Hunt, who one ally called the government’s new “chief executive” — with Ms Truss relegated to the role of back-seat chairwoman.

Mr Hunt said on Sunday that Mr Kwarteng and Ms Truss had erred on September 23 in trying to cut taxes for the highest earners, and tried to “fly blind” in presenting their plan without independent forecasts from the Office for Budget Responsibility.

“The Prime Minister’s recognised that, that’s why I’m here,” Mr Hunt told Sky News.

In one of his first acts on taking office on Friday, the new Chancellor spoke to Bank of England governor Andrew Bailey, who has had to stage costly interventions to calm febrile bond markets.

Liz Truss faces the media after sacking Kwasi Kwarteng on Friday. Picture: Getty Images

Briefing reporters in Washington, Dr Bailey said on Saturday: “I can tell you there is a very clear and immediate meeting of minds on the importance of stability and (fiscal) sustainability.”

Tax cuts were the centrepiece of the ill-starred budget announced by Mr Kwarteng and Ms Truss. But they were financed through billions in extra borrowing, causing panic on financial markets at the prospect of higher inflation, which has already left British households in the grip of a cost-of-living crisis.

“We will have some very difficult decisions ahead,” Mr Hunt said, warning that “all government departments” faced spending curbs, including welfare, health and defence. “And some taxes will not be cut as quickly as people want. Some taxes will go up.”

Soon after Mr Hunt’s upcoming fiscal statement, the Bank of England will hold its next rate-setting meeting on November 3.

In a separate speech on Saturday, Dr Bailey warned anew that the central bank would “not hesitate” to raise rates to keep soaring inflation under control, and said a “stronger response” than previously expected may have to come.

Ms Truss dismissed Mr Kwarteng hours after he had rushed home early from international finance meetings in Washington, and she staged another U-turn in acquiescing to a significant rise in profits tax levied on companies.

At a subsequent Downing Street news conference, the Prime Minister took only four questions, glancing nervously around the room and delivering terse replies before abruptly leaving after just over eight minutes. “Robotic, hesitant, tone-deaf, defiant and still utterly convinced of the purity and necessity of her mission, Liz Truss killed off her political career in a matter of minutes,” Times columnist Jenni Russell wrote.

Asked why she herself should not resign, Ms Truss said she was “absolutely determined to see through what I have promised” — but her comments only served to depress the pound and bond markets further.

Former Tory leader William Hague said Ms Truss’s premiership now “hangs by a thread”, as the newspapers recounted bitter infighting among party factions.

Up to 100 letters expressing no confidence in Ms Truss have been submitted by Tory MPs, the Sunday Times said, with opponents said to be coalescing around her defeated leadership rival Rishi Sunak and another one-time foe, Penny Mordaunt. But with Labour surging in the polls, Welsh Secretary Robert Buckland warned his restive colleagues against “throwing another prime minister to the wolves”.

Labour leader Keir Starmer accused Ms Truss of “clinging on”, and demanded an early election. “The Tories no longer have a mandate from the British people,” he tweeted, after Ms Truss became prime minister through the votes of some 80,000 Tory party members — less than 0.2 per cent of the UK electorate.

AFP