December 3, 2022

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Truss Nettles’ economic plan, austerity returns in UK – 10/17/2022 at 19:09

Britain's new Chancellor of the Exchequer Jeremy Hunt leaves 10 Downing Street on October 14, 2022 (AFP/ISABEL INFANTES)

Britain’s new Chancellor of the Exchequer Jeremy Hunt leaves 10 Downing Street on October 14, 2022 (AFP/ISABEL INFANTES)

Britain’s new Chancellor of the Exchequer, Jeremy Hunt, warned of “very tough decisions” on Monday, raising fears of a return to austerity after Prime Minister Liz Truss scrapped its suspended economic plan.

After a series of humiliating reversals of his campaign promises, the government leader’s days appear numbered.

His new president, hastily appointed on Friday after a market storm unleashed by his predecessor Kwasi Kwarteng’s “growth plan”, now takes the helm of government after weeks of market turmoil that threatened the country’s financial stability.

Without waiting, Mr Hunt on Monday released the main lines of the medium-term budget plan, which is due to be presented in full on October 31. He promised the government would prioritize “helping the most vulnerable” while rejecting Liz Truss’s initial plan in its entirety, warning of “very tough” decisions with cuts in state spending and tax increases in the future.

At the end of September Kwasi Kwarteng’s plans for massive tax cuts and a massive boost to energy tariffs were not fully accounted for and would have to be financed by borrowing, raising fears of slippage in the public accounts.

The pound fell to an all-time low and long-term government borrowing rates rose, undermining pension funds and raising borrowing rates for households and businesses in an already struggling UK economy.

The Bank of England had to intervene to prevent the situation from deteriorating into a financial crisis and the Monetary Fund called for a course correction.

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Liz Truss sent the minister responsible for relations with parliament, Benny Mordant, to respond to opposition parties in parliament, fueling questions about her disintegrating powers.

Labor MP Stella Creasy torpedoed the Prime Minister “hiding under his desk with no guts”.

Angela Eagle from the same political side stressed that the president “cannot remain in his position humiliated”.

British Prime Minister Liz Truss during a press conference in Downing Street, October 14, 2022 (POOL / Daniel Leal)

British Prime Minister Liz Truss during a press conference in Downing Street, October 14, 2022 (POOL / Daniel Leal)

Mrs Truss later appeared at Westminster with the chancellor of the exchequer, but the latter faced stiff opposition and remained blankly silent.

With only 40 days in power, he risks becoming the shortest-serving Prime Minister across the Channel.

“This is a crisis created by the Conservatives in Downing Street, but ordinary people are paying the price,” lamented Rachel Reeves, Labour’s finance manager.

He asked why the government did not tax energy producers to fund budget support, and said he feared a return to “austerity season 2” after the severe cuts of the 2010s.

Shell boss Ben van Beurten suggested ten days ago that governments should tax energy companies more when they make more profits amid the energy cost crisis.

– to repair the damage –

The pound was up 2.18% at $1.1419 by 4:15pm GMT, signaling a slowdown in immediate markets. The 30-year bond yield was at 4.38%, down sharply from Friday but higher than before Liz Truss took office.

Banknotes bearing the image of Queen Elizabeth are seen in London on April 22, 2022 (AFP / Tolga Akmen)

Banknotes bearing the image of Queen Elizabeth are seen in London on April 22, 2022 (AFP / Tolga Akmen)

In Monday’s announcements, the “biggest cost” cap on energy bills for all households, which will finally be in place until April, will no longer be in place for two years. Beyond that, the Treasury will consider a new “cheaper” approach while protecting “those most in need”.

In a long list of wasteful tax cuts, Mr. Hunt outlined a scheme for tax-free shopping centers for non-residents, and reduced the tax rate on dividends.

A cut in tax rates on the incomes of the rich has already been abandoned and a rise in corporation tax will finally take place.

Taken together, Hunt said the tax measures would “raise around £32 billion a year”.

The IFS think tank warns that the announcements will not be enough to “plug holes in the government’s budget plans” or “repair the damage done in the past few weeks”.