UK Leader In Peril After Treasury Chief Axes ‘Trussonomics’

by | Oct 17, 2022 | Politics

LONDON (AP) — The U.K.’s new Treasury chief ripped up the government’s economic plan on Monday, dramatically reversing most of the tax cuts and spending plans that new Prime Minister Liz Truss announced less than a month ago. The move raises more questions about how long the beleaguered British leader can stay in office.Chancellor of the Exchequer Jeremy Hunt, said he was scrapping “almost all” of Truss’ tax cuts, along with her flagship energy policy and her promise — repeated just last week — that there will be no public spending cuts.AdvertisementWhile the reversal of policy calmed financial markets and helped restore the government’s economic credibility, it further undermined the prime minister’s rapidly crumbling authority and fueled calls for her to step down before her despairing Conservative Party forces her out.Truss declined to attend the House of Commons to answer a question on the economy from the leader of the opposition, sending House of Commons leader Penny Mordaunt in her place. Mordaunt denied a lawmaker’s suggestion that Truss was “cowering under her desk” to avoid scrutiny.“The prime minister is not under a desk,” Mordaunt said, words hardly likely to inspire confidence in the leader who only came to power last month.Truss’ spokesman said the prime minister and Hunt had jointly agreed on the economic changes. But Hunt told Conservative lawmakers that Truss “backed him to the hilt in making difficult decisions” — suggesting he has a free hand to make policy.AdvertisementWith Truss sitting silently beside him, Hunt told lawmakers that he was canceling Truss’ plan to reduce the basic rate of income tax by 1 percentage point and most of her other libertarian economic policies. In a message aimed squarely at reassuring the financial markets, he said Britain was “a country that funds our promises and pays our debts.”“And when that is questioned, as it has been, this government will take the difficult decisions necessary to ensure there is trust and confidence in our national finances,” Hunt said.Such major policy announcements are normally made first in the House of Commons, but Hunt disclosed most of the details hours in advance in a televised statement.Hunt was appointed Friday after Truss fired his predecessor Kwasi Kwarteng, who spent less than six weeks in the Treasury job. Hunt is seeking to restore the Conservative government’s credibility for sound fiscal policy after Truss and Kwarteng rushed out a plan for tax cuts without detailing how they would pay for them.Truss and Kwarteng jointly came up with a Sept. 23 announcement of 45 billion pounds ($50 billion) in unfunded tax cuts that immediately spooked the financial markets. The cuts fueled investor concerns about unsustainable levels of government borrowing, which pushed up government borrowing costs, raised home mortgage costs and sent the pound plummeting to an all-time low against the dollar. The Bank of England was forced to intervene to protect pension funds, which were squeezed by volatility in the bond market.AdvertisementOver the weekend, Hunt has been dismantling that economic plan. The government had already ditched parts of its tax-cutting plan and announced it would make a medium-term fiscal statement on Oct. 31, weeks earlier than previously sch …

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