New Finance Minister Jeremy Hunt scrapped Prime Minister Liz Truss’s economic plan and slashed a huge energy subsidy on Monday, in one of the biggest shifts in British fiscal policy aimed at curbing a dramatic loss of investor confidence.
Tasked with stemming the bond market slump that has raged since the government announced huge unfunded tax cuts on Sept. 23, Hunt has rolled back all the policies that helped Truss get elected prime minister a short time ago. six weeks.
His spokesman denied that Hunt is now running the country with his new strategy, which will also include spending cuts and has caused the pound to soar against the dollar and government bond prices to begin to recover from a three-week setback. .
“I remain very confident in the UK’s long-term economic prospects as we deliver on our mission of betting on growth,” Hunt said in a televised clip. “But growth requires trust and stability, and the UK will always contribute to that path.”
Under the new plan, most of the £45bn of unfunded tax cuts from Truss will go away and a two-year energy support scheme for homes and businesses – expected to cost more than £100bn – now it will only be valid until April.
Thereafter, the Government will review the best way to proceed and draw up a specific plan that “costs the taxpayer much less than expected.”
Hunt said planned changes to the tax cut would allow 32 billion pounds ($36 billion) to be raised each year. The pound soared as much as 1.4% to a session high of $1.1332 after the statement.
Truss said he was now charting a new course for growth, but would protect stability. “We have taken steps to chart a new course for growth that supports and works for people across the UK,” he said on Twitter.
The crisis began on September 23, when new Prime Minister Truss and her then Chancellor of the Exchequer, Kwasi Kwarteng, announced £45 billion of unfunded tax cuts to lift the economy out of years of stagnation.
But the response from bond investors who would fund the plan was so violently negative that borrowing costs soared and lenders withdrew mortgage offers.
Finally, the Bank of England had to intervene to prevent the pension funds from sinking
After undoing one of the tax cuts, Truss fired his old friend Kwarteng on Friday and tasked Hunt, a former health and foreign minister, with cutting others.
The Bank of England stuck to its end of aid schedule on Friday, which meant Hunt had to rush to reverse policies and find spending cuts to appease markets and prevent borrowing costs from rising further on Monday. in the morning.
Truss’s spokesman was asked in a daily briefing how the prime minister could retain any credibility, having backtracked on the program that secured her election from party members.
“He’s making the tough decisions that are necessary to change our focus so that we can provide economic stability and maintain that stability of leadership which is also important,” he said.
The change of course has angered lawmakers who supported her and encouraged those who oppose her to try to find a way to remove her from power.