LONDON – Britain’s Chancellor of the Exchequer Jeremy Hunt will accelerate plans on Monday to bring order to the country’s public finances in a fresh bid to reassure markets still skittish about Liz Truss’s economic programme.
Hunt will make a statement mid-morning on measures to support fiscal sustainability, a British official said. He will then speak to the House of Commons at 3.30pm London time (10.30pm SGT).
Hunt spent Sunday huddling with Truss to work out how much more of her plans they will have to ditch in order restore stability to Britain’s finances. The chancellor also spoke with Bank of England Governor Andrew Bailey and the head of the Debt Management Office. He still intends to deliver a full fiscal plan on Oct 31.
Since taking over the Treasury three days ago, the new chancellor has been outlining a radically different fiscal approach from Truss, saying taxes would have to rise and spending would have to be cut. That was part of a bid to prevent further punishing increases in Britain’s government borrowing costs.
The pound extended gains against the dollar in early trading, rising as much as 1.1 per cent to US$1.1296.
Truss has already been forced into a series of U-turns since investors dumped the pound and gilts after her call for £45 billion (S$72 billion) in unfunded tax cuts. She fired her first chancellor and shelved plans to freeze corporate tax and lower the top rate of tax.
While early gains for the pound suggested confidence in Hunt’s alternative approach, economists still warn there is a budget hole to fill with Bloomberg Economics calculating £24 billion more is needed to return the national debt to sustainability. The Sunday Times reported Hunt plans to delay by a year a plan to cut the basic rate of income tax, saving £5 billion.
Truss is due to host a reception for the Cabinet at 10 Downing Street on Monday evening to continue to get their input into a medium-term fiscal plan, according to an official familiar with the matter.
As of Sunday evening, three Tory MPs were publicly calling for her to quit and multiple others said privately they’ll write to Graham Brady, the chairman of the backbench 1922 Committee, urging him to change party rules so a vote of confidence can be held in Truss.
Plotting against Truss is accelerating because the Tories are spooked by a record poll deficit against Labour and the belief they face electoral meltdown if she is allowed to stay in post. Supporters of Rishi Sunak, who came second to Truss in the recent Tory leadership contest, stepped up efforts over the weekend to secure support to install him.
Julian Smith, a former chief whip, has been in touch with multiple Conservative MPs to gauge support for a so-called Sunak coronation, bypassing another vote from the party’s grassroots supporters. Mel Stride, a vocal critic of Truss and a Sunak supporter, is hosting a dinner for MPs on Monday evening, following a similar event last week.
The prime minister’s position is protected by a one-year immunity clause under current Conservative rules. About two-thirds of the party’s nearly 360 MPs need to tell the 1922’s executive to change the rules before it would do so, according to a person familiar with its deliberations, meaning an imminent ouster of Truss is not likely. The executive won’t meet until Wednesday, the person said.
Still, Truss could plausibly limp on for weeks or months with the markets calmed, her policy platform reversed and Hunt effectively in charge, according to a senior Conservative operator who spoke on condition of anonymity. This is still a likely outcome, the person said, because there is no unity candidate and enough MPs want to give the new Hunt operation a chance. BLOOMBERG
