UK’s Rishi Sunak delays plan to plug Britain’s budget black hole

Mr Sunak began his tenure by re-appointing a host of ministers from his predecessor’s top team. PHOTO: AFP

LONDON – Britain’s new Prime Minister Rishi Sunak on Wednesday delayed the announcement of a keenly awaited plan for repairing the country’s public finances until Nov 17, two-and-a-half weeks later than previously planned.

The postponement, Mr Sunak’s first policy decision since taking over from Ms Elizabeth Truss on Tuesday, briefly raised British borrowing costs in financial markets, but there was no repeat of the panic bond selling caused by Ms Truss’s September tax-cutting plan.

Mr Sunak takes on an economy facing recession at a time when the Bank of England is raising interest rates to tame double-digit inflation. Low growth and rising borrowing costs have worsened the strain on already-stretched public finances.

The government is drawing up spending cuts and cancelling tax cuts just as the rising cost of mortgages, food, fuel and heating is squeezing many household budgets to their limits.

“I have been honest. We will have to take difficult decisions to restore economic stability and confidence,” Mr Sunak told Parliament, promising to protect the most vulnerable. “The Chancellor (Jeremy Hunt) will set that out in an autumn statement in just a few weeks.”

Finance Minister Hunt said more time was needed to ensure the new plan took into account new economic forecasts. It is expected to set out how the government will plug a budget shortfall of as much as 40 billion pounds (S$65.24 billion). Unlike Ms Truss’s plan last month, it will be fully audited by Britain’s fiscal watchdog.

Asked to confirm the government’s commitment to an expensive inflation-pegged rise in retirement pensions, Mr Sunak’s press secretary said she would not speculate ahead of Nov 17.

His team gave the same answer on other potentially costly spending decisions on foreign aid, defence and welfare payments.

On Wednesday, Britain saw the outlines of the next no-holds-barred general election campaign, as Mr Sunak gave as good as he got from the opposition Labour Party at his first session of “Prime Minister’s Questions” – delighting his Conservative backbenchers after the turmoil of recent weeks.

“The only time he ran in a competitive election, he got trounced by the former prime minister, who herself got beaten by a lettuce,” Labour leader Keir Starmer mocked Mr Sunak in a febrile House of Commons.

Ms Truss suffered a political demise so rapid that a celebrity lettuce outlasted her in an online stream shown by the Daily Star newspaper.

Mr Sunak reminded Mr Starmer that he was beaten by Ms Truss because Tory members did not believe his warnings of the economic carnage that her tax-cutting policies would provoke.

He contrasted that with Mr Starmer’s own support for the far-left Jeremy Corbyn to become prime minister, when Mr Corbyn led Labour to defeat at the last election in 2019.

“I told the truth for the good of the country,” the new Conservative leader said. “He (Mr Starmer) told his party what it wanted to hear. Leadership is not selling fairy tales. It is confronting challenges,” he shouted.

Pledging to unite his fractured Conservatives, and an increasingly unimpressed country, Mr Sunak began his tenure by re-appointing a host of ministers from his predecessor’s top team.

The former finance minister retained Mr Hunt as chancellor of the Exchequer, bidding to keep markets on his side after he stabilised the situation with his initial appointment nearly two weeks ago.

He also kept Ms Truss’ foreign, defence, trade and culture ministers, among others, as well as controversially bringing back recently fired Home Secretary Suella Braverman.

The line-up “reflects a unified party and a Cabinet with significant experience, ensuring that at this uncertain time there is continuity at the heart of government”, a Downing Street source said.

In an apparent bid for better domestic unity, Mr Sunak held immediate calls with the devolved leaders of Scotland and Wales – something Ms Truss failed to do in her seven-week tenure.

In his first call with a foreign leader, Mr Sunak told Ukrainian President Volodymyr Zelensky Britain would continue its “steadfast support” following Russia’s invasion.

He also spoke to United States President Joe Biden, who earlier hailed the appointment of the first British-Indian prime minister as “groundbreaking”.

“President Biden said that the UK remains America’s closest ally, and the Prime Minister agreed on the huge strength of the relationship,” Mr Sunak’s office said of their discussions.

European leaders offered their own congratulations, while Irish premier Micheal Martin reminded Mr Sunak of their “shared responsibility” to safeguard peace in Northern Ireland following tensions under Mr Johnson and Ms Truss.

In a related development, fracking will be banned in England under Mr Sunak, reversing a decision made by Ms Truss, as the new British leader returned to a 2019 Conservative Party manifesto pledge.

During her short term as prime minister, Ms Truss had lifted a moratorium on fracking, arguing last month that strengthening the country’s energy supply was a priority.

But Mr Sunak’s spokesman said he would commit to a moratorium, as originally set out by the Conservative Party during a 2019 election campaign.

Ms Truss had said fracking - extracting shale gas from rocks by breaking them up - would be allowed where it was supported by communities, but the plans had faced opposition from many lawmakers, including from her governing Conservatives.

Fracking, which has been opposed by environmental groups and some local communities, was banned in 2019 after the industry regulator said it was not possible to predict the magnitude of earthquakes it might trigger. AFP, REUTERS

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