“The UK will always pay,” says Minister Hunt in an emergency declaration to overturn tax and spending cuts
The new British Finance Minister, Jeremy Hunt, has announced the elimination of all the tax reductions and repeals that his predecessor had presented three weeks ago, and that are not being processed now in Parliament, and the limitation until April of the subsidy system to energy consumption prices. “The UK will always pay”, he has said in an “emergency statement”.
Hunt’s announcement is another step in an accelerated reversal of fiscal policy by Prime Minister Liz Truss and her former Chancellor of the Exchequer Kwasi Kwarteng to boost growth. Following the financial turmoil caused by her package, Kwarteng’s dismissal was already announced on Friday and that the tax increase on company profits will be maintained.
The capital markets have rewarded Hunt’s speed with increases in the pound sterling parity and in bond prices, which in this case means a lower cost of debt. This Monday is the first day in which the bond market operates without the purchase program by the Bank of England, deployed to avoid dynamic buying and selling spirals.
Diplomacy
The limitation of the period of time for the subsidy of the cost of energy is another consequence of the impulsive personality of Truss, who went from rejecting the idea of subsidies during the campaign to replace Boris Johnson to presenting a universal ‘guarantee’ to all consumers, regardless of their income, that the annual cost for an average household will not exceed 2,900 euros in the next two years. The possible cost was estimated at around 170,000 million euros.
The Government’s new fiscal policy will be presented more fully in two weeks, but Humts has run to calm relations with the Bank of England and with the markets. Truss’s task is also to appease the parliamentary group, where there is a spectrum that ranges from those outraged by his management of the first forty days of his mandate who want his resignation, to those who recommend calm, unity and not throwing British politics into a new whirlwind.
The prime minister, whose power is currently fragile, will meet with deputies. Her spokespersons have underlined that in her diplomacy with co-religionists she will include members of the ‘One Nation’ current party, which are grouped around the idea of moderate management. Truss is identified with the so-called “party right.” They are more liberal economically and more nationalistic.
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