Britain’s new finance minister Saturday warned of looming tax hikes as he admitted to “mistakes” made in a disastrous budget that still threatens to bring down Prime Minister Liz Truss.
“Truss fights for survival,” The Times newspaper headlined a day after she forced chancellor of the exchequer Kwasi Kwarteng to carry the can for market turmoil sparked by their budget on September 23.
The Times, Telegraph and other newspapers reported that senior Conservative members of parliament were still plotting to unseat Truss, possibly within days, aghast at the party’s collapse in opinion polls since she replaced Boris Johnson on September 6.
New chancellor Jeremy Hunt indicated he would be tearing up the strategy that brought Truss to 10 Downing Street.
“There were mistakes,” acknowledged Hunt, a former foreign secretary who is seen as a Tory centrist.
He said Kwarteng and Truss had erred in trying to cut taxes for the highest earners, and in presenting their budget without independent forecasts from the Office for Budget Responsibility.
“The prime minister’s recognised that, that’s why I’m here,” Hunt told Sky News.
In one of his first acts on taking office late Friday, the new minister spoke to Bank of England governor Andrew Bailey, who has had to stage costly interventions to calm febrile bond markets.
“They discussed the importance of tackling global inflation, and their commitment to economic growth and fiscal discipline,” the Treasury tweeted.
Tax cuts were the centrepiece of the ill-starred budget announced by Kwarteng and Truss.
But they were financed through billions in more borrowing, causing panic on financial markets, which has fed into higher costs for British households in the middle of a cost-of-living crisis.
“We will have some very difficult decisions ahead,” Hunt said, warning that “all government departments” face spending restraint.
“And some taxes will not be cut as quickly as people want. Some taxes will go up.”
Hunt confirmed he would deliver a new fiscal statement on October 31, telling BBC radio he had a “clean slate” to start afresh — underlining that Truss has considerably weakened her own position after coming to power on a hard-charging platform of reform.
– ‘Hanging by a thread’ –
Truss dismissed Kwarteng hours after he had rushed home early from international finance meetings in Washington, and staged another U-turn in acquiescing to a significant rise in profits tax levied on companies.
At a subsequent Downing Street news conference, her first since succeeding Johnson, the prime minister gave a widely panned performance which did nothing to calm market nerves.
Truss took only four questions, looking nervously around the room and delivering terse replies.
She insisted she had acted “decisively” in firing Kwarteng to bring about “economic stability” — but the pound resumed its slide on currency markets and UK bond markets wobbled anew.
Asked why she herself should not resign, Truss said she was “absolutely determined to see through what I have promised”.
But having abandoned the right-wing economic promises that won her the Conservative leadership election against rival Rishi Sunak, Truss faced mounting criticism that her political credibility was in tatters.
“I feel let down, very badly let down,” Christopher Chope, a Tory parliamentarian and Truss loyalist, told BBC television.
Truss’s actions Friday were “totally inconsistent with everything that the prime minister stood for when she was elected”, he complained.
Former Conservative leader William Hague said Truss’s premiership now “hangs by a thread”, while ex-chancellor Philip Hammond said she had “thrown away years and years of painstaking work” to establish the party’s record for economic competence.
But with the opposition Labour party surging in the polls, Welsh Secretary Robert Buckland warned his restive colleagues against another putsch so soon after they toppled Johnson.
“I think if we start with gay abandon, throwing another prime minister to the wolves, we’re going to be faced with more delay, more debate, more instability,” he told BBC radio.