- PM Truss continues to be under intense political pressure
- The government must be accountable for every penny, says New Finmin
- Promises to make “difficult decisions” about spending and taxes
LONDON (Reuters) Oct 16
Prime Minister Truss appointed Hunt on Friday to rescue her leadership as confidence in her ability to govern the country waned both within her own Conservative Party and in international financial markets.
The Sunday papers were full of stories about plans to replace them.
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Investors have massively sold British government bonds since September. January, when Hunt’s predecessor, Kwasi Kwarteng, announced a series of unfunded tax cuts without releasing a set of independent economic forecasts.
The domino effects forced the Bank of England into emergency action to protect pension funds and pushed up mortgage costs – putting additional pressure on Brits’ finances.
“What I’m going to do … is show the markets, the world and viewers back home that we can properly account for every penny of our tax and spending plans,” Hunt said in an interview that was broadcast with BBC television on Sunday.
The first test for Hunt and Truss comes Monday morning when trading resumes in the stricken bond market without the support of the Bank of England’s asset purchase program, which expired on Friday.
The UK economy is at risk of slipping into recession as the central bank hikes interest rates to curb rising inflation. Bank Governor Andrew Bailey said Saturday he thinks so a big interest rate hike needed in early November.
Truss – who became leader of the Conservative Party just 41 days ago after promising to cut taxes – sacked Kwarteng on Friday, abandoning key parts of the jointly agreed program.
The chaos has fueled discontent in the ruling party, which was already fragmented before Friday and trailed far behind the opposition Labor Party in opinion polls.
Three Conservative lawmakers separately called for their resignations on Sunday.
“In recent weeks I have watched as the government undermined Britain’s economic credibility and fractured our party beyond repair. Enough is enough,” lawmaker Jamie Wallis wrote on Twitter, releasing a letter to Truss urging her to resign.
Conservative colleague Crispin Blunt told Channel 4’s The Andrew Neil Show that for Truss “the game is up and it’s now a question of how the succession will be handled”.
An MP on the committee that organizes leadership competitions said the rules protecting Truss from a formal challenge for 12 months could be changed if an “overwhelming majority” of Conservative MPs so wished.
“I don’t think we’re anywhere near that right now,” Geoffrey Clifton-Brown, treasurer of the 1922 committee, told Sky News.
Even US President Joe Biden criticized Truss’s original economic plan as a mistake.
After effectively crushing Truss’s game that tax cuts would boost economic growth and fund public spending, Hunt has announced plans to go further, including imposing tighter spending controls and some tax hikes.
“I’m going to ask every government department to find more efficiency savings,” he said, adding that while he wanted to keep other tax cuts promised by the government, he wasn’t ruling out anything to help balance the books.
He wants to present details in a tax return on October 10th. 31
The Sunday Times said initial forecasts by the Office for Budget Responsibility showed a deficit of £72bn ($80bn) in current plans. The newspaper also said Hunt would delay a planned property tax rate cut.
The Treasury declined to comment on the report.
When asked if the markets would have confidence in his plans, Hunt told the BBC: “Well, I think, you know, for people who deal in the markets, actions speak louder than words.”
Former deputy governor of the Bank of England Charlie Bean told Sky but events have taken their toll on Britain’s credibility.
“Basically, we’ve gone from having a not-too-dissimilar look like the US or Germany as an offer for credit to a more Italian and Greek look.”
‘THE PM IS RESPONSIBLE’
As Hunt struggles to stave off financial market pressures, Truss deals with mutiny within her party.
Reports citing anonymous sources filled the Sunday papers, with Defense Secretary Ben Wallace being touted by the Sunday Mirror as the preferred replacement for senior lawmakers, and Rishi Sunak – whom Truss defeated last month in a leadership contest that elected Conservative Party members – as another possible successor of named the sun on sunday.
Truss wrote in the Sun that their plans “had gone further and faster than markets expected.”
“I was listening, I understand,” she wrote. “We cannot pave the way to a low-tax, high-growth economy without maintaining market confidence in our commitment to sound money.”
Conservative lawmaker Robert Halfon said their original plans made the government look like “libertarian jihadists” who treated the whole country as laboratory mice to conduct ultra-free market experiments.
He told Sky that while he is not now calling for her resignation, things need to improve.
Hunt was asked if, given the drastic political change he had overseen, he was now actually leading the government.
“The prime minister is responsible,” he said. “She changed the way we get there. It has not changed the goal, which is to make the country grow.”
($1 = 0.8953 pounds)
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Reporting by William James and William Schomberg; Edited by Louise Heavens, Alexandra Hudson and John Stonestreet
Our standards: The Thomson Reuters Trust Principles.