UK Finance Secretary Hunt pledges to regain confidence in financial markets

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LONDON — New finance minister Jeremy Hunt has vowed to regain Britain’s economic credibility by fully accounting for the government’s tax and spending plans, while insisting his boss Liz Truss remains in charge of the country .

Prime Minister Truss appointed Hunt on Friday in a bid to salvage his leadership as confidence in his ability to lead the country has dried up both within his own Conservative party and in international financial markets.

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The Sunday papers were full of stories of plans to replace her.

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Investors have sold off UK government bonds since Sept. 23, when Hunt’s predecessor, Kwasi Kwarteng, announced a series of unfunded tax cuts without releasing a set of independent economic forecasts.

The ripple effects forced the Bank of England into emergency intervention to protect pension funds and drove up mortgage costs, adding to the strain on Britons’ finances.

« What I’m going to do … is show the markets, the world, in fact the people watching at home, that we can properly account for every penny of our tax and spending plans, » Hunt told the BBC television in an interview broadcast on Sunday. .

The first test for Hunt and Truss comes Monday morning when trading in the troubled bond market resumes without support from the Bank of England’s bond-buying program, which expired on Friday.

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Britain’s economy is at risk of slipping into recession just as the central bank is raising interest rates to control soaring inflation. Bank Governor Andrew Bailey said on Saturday he believed a sharp rate hike would be 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 and scrapped key parts of the program they had agreed together.

The chaos fueled discontent in the ruling party, which had already erupted before Friday and trailed the opposition Labor Party far behind in opinion polls.

On Sunday, three conservative lawmakers separately called for his resignation.

« In recent weeks I have watched the government undermine Britain’s economic credibility and fracture our party beyond repair. Enough is enough, » lawmaker Jamie Wallis wrote on Twitter, posting a letter to Truss asking him to resign.

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Fellow Tory Crispin Blunt told Channel 4’s ‘The Andrew Neil Show’ that for Truss « the game is over, and it’s now about how the estate is handled ».

A lawmaker on the committee that organizes the leadership contests said the rules, which protect Truss from official challenge for 12 months, could be changed if an « overwhelming majority » of Conservative lawmakers wanted it.

« I don’t think we’re anywhere near that at the moment, » Geoffrey Clifton-Brown, treasurer of the 1922 committee, told Sky News.

Even US President Joe Biden criticized Truss’ initial economic plan as a mistake.

DIFFICULT DECISIONS

After effectively dismantling Truss’ bet that tax cuts would spur economic growth and pay for government spending, Hunt said he will go further, including imposing tougher spending controls and some tax hikes. .

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“I will ask each ministry to find new efficiency savings,” he said, adding that if he wanted to keep the other tax cuts promised by the government, he did not exclude anything in his will. to balance the accounts.

He will set out the details in a financial statement on October 31.

The Sunday Times said the Office for Budget Responsibility’s initial forecast showed a shortfall of 72 billion pounds ($80 billion) in current plans. The newspaper also said Hunt would delay a planned reduction in the basic income tax rate.

The Treasury declined to comment on the report.

Asked if the markets would trust his plans, Hunt told the BBC: « Well, I think, you know, for people who trade in the markets, actions speak louder than words. «

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Former Bank of England Deputy Governor Charlie Bean told Sky that events had weighed on Britain’s credibility, however.

“Basically, we have gone from a loan proposal that is quite similar to the United States or Germany to a loan proposal that is more like Italy and Greece.

« THE PM IS IN CHARGE »

As Hunt seeks to fend off pressure from the financial markets, Truss faces a mutiny within his party.

Reports citing unnamed sources filled the newspapers on Sunday, with Defense Secretary Ben Wallace touted as the Sunday Mirror’s favorite senior lawmaker replacement, and Rishi Sunak – who Truss beat last month in a race to the leadership that elected members of the Conservative Party – named as another possible successor by the Sun on Sunday.

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Writing in the Sun, Truss admitted his plans had gone « further and faster than markets expected ».

« I listened, 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 currency. »

Conservative lawmaker Robert Halfon said his initial plans made the government look like “libertarian jihadists” who had treated the whole country like laboratory mice on which to conduct ultra-free market experiments.

He told Sky that while he’s not asking for his resignation now, things have to get better.

Hunt was asked whether, given the sweeping change in policy he had overseen, he was now effectively running the government.

« The prime minister is in charge, » he said. “She changed the way we are going to get there. It has not changed the destination, which is to make the country grow. ($1 = 0.8953 pounds)

(Reporting by William James and William Schomberg; Editing by Louise Heavens, Alexandra Hudson and John Stonestreet)