The new British Finance Minister Jeremy Hunt has almost completely withdrawn the economic stimulus and tax cut package announced by the British government just three weeks ago. As Hunt said in a televised address Monday, “almost all” tax plans will be reversed. His ministry also wants to review whether a costly freeze on gas and electricity prices can be maintained beyond this winter.
After the review, it should be determined how the government will subsidize the massively increased bills for electricity and gas “beyond April next year”, said Hunt when presenting the key points of his new budget. This should be complete by October 31st.
The Chancellor of the Exchequer also announced that changes to proposed tax cuts would bring in £32bn each year. “I remain extremely positive about the UK’s long-term economic prospects as we fulfill our mission of working towards growth,” Hunt said in front of television cameras. “But growth requires confidence and stability and the UK will pay its way.”
On Friday, Prime Minister Liz Truss fired Finance Minister Kwasi Kmachen and appointed Hunt as his successor. Since Kwarteng announced details of tax plans at the end of September, which were to be financed through debt, there had been turbulence on the financial markets as there were doubts about their ability to be financed. The British central bank had to intervene with bond purchases. Rising interest rates on home loans exacerbated the cost of living crisis for many homeowners.
On Sunday, Truss met Hunt at her country home to finalize the new budget. In the evening, the finance minister also met with central bank chief Andrew Bailey and the head of the financial authority DMO to discuss the project.
Susannah Streeter of the British investment company Hargreaves Lansdown said Hunt acts like a teacher who should bring a failing school back into shape. He is now facing his first test with an emergency budget designed to calm the financial markets. Truss, however, remains in power and has “the final say on the direction of travel.”
The fact that Hunt is now doing it again is a sign that the government considers the situation to be extremely serious. But if you believe the British media, Truss can hardly be held as head of government anyway. Accordingly, her fall is already being prepared in the conservative governing party.
Sources: “BBC”, “Reuters”, with AFP
