The new UK Chancellor of the Exchequer, Jeremy Hunt, has said more taxes are going up, and UK government spending won’t rise as much as some people want.
With this, Hunt tries to reassure the financial markets about the budget policy of the British government but seems to contradict Prime Minister Liz Truss. At Hunt’s appointment, she said no significant policy changes are expected.
According to the two, Truss’ and Kwarteng’s plan was intended to make the country more productive and grow the economy. Hunt says he supports that goal but not their method. Borrowing money to pay for tax cuts does not work, he said.
Hunt was appointed as a replacement for Kwasi Kwarteng on Friday. Truss sacrificed that because their jointly drawn-up budget plan caused great unrest. In addition to cancelling an already planned increase in corporate income tax, Truss and Kwarteng also wanted to reduce income tax for the richest Britons and spend tens of billions extra on energy support. They wanted to pay for that by borrowing extra.
In the financial markets, yields on British government bonds then shot up, and the pound fell against the dollar. Investors and investors were less confident that the UK’s debt burden would be sustainable and therefore wanted more interest to lend money to the UK. The higher interest rates on government debt led to problems for British pension funds and forced the Bank of England to buy government bonds.
The unrest this caused already ensured that Truss and Kwarteng reversed the tax cut for the richest British. On Friday, Truss also announced that corporate taxes would be raised. Despite these interventions, her government still spends much more money than it comes in. The central bank’s support campaign has also ended, and the financial markets remained unsettled on Friday.
“What people want, the market wants, the country needs now is stability,” Hunt told BBC Radio. However, he added that the finance minister does not control the market. “But I can show that we can afford our tax and expense plans.” Hunt even seemed to indicate that cuts could be coming. According to him, all government services must report where costs can be saved.