Latest chancellor Jeremy Hunt threatens tax rises and spending cuts

Jeremy Hunt yesterday warned of rising taxes and public spending cuts as he ditched Liz Truss’s disastrous economic strategy hours after taking up the post of chancellor, the fourth in four months.

Hunt, twice a Tory leadership contender and now said to be the most powerful figure in the Government, admitted “mistakes” had been made in the so-called mini-budget set out by his predecessor, Kwasi Kwarteng, and that tax rises could form part of a painful fiscal package designed to restore market confidence in the UK.

Meanwhile, Andrew Bailey, the governor of the Bank of England, warned interest rates may have to be pushed higher while the Resolution Foundation think tank warned that five million households could see their annual mortgage payments rise by an average of £5,100 between now and the end of 2024.

Hunt was parachuted into No 11 on Friday to replace Kwarteng, sacked by Truss after his “financial event” three weeks ago spooked the markets, sent the pound plummeting and forced the Bank of England to intervene in a bid to restore financial stability.

The mini-budget was ­published without providing independent reassurance from the Office for Budget Responsibility and Hunt admitted: “It was a mistake when we’re going to be asking for difficult decisions across the board on tax and spending to cut the rate of tax paid by the very wealthiest.

“It was a mistake to fly blind and to do these forecasts without giving people the confidence of the Office for Budget Responsibility saying that the sums add up. The prime minister’s recognised that, that’s why I’m here.”

Earlier he had told the BBC that he now had a “clean slate” and indicated that cuts to public spending and tax rises could be coming. He said: “Spending will not rise by as much as people would like and all Government departments are going to have to find more efficiencies than they were planning to.

“And some taxes will not be cut as quickly as people want. Some taxes will go up. So it’s going to be difficult.”

Hunt also refused to ­ commit to a key pledge by Truss to boost defence ­ spending to 3% of national income by 2030. He said the Ministry of Defence would have to make additional savings, like all other departments, a move that could trigger the resignation of Defence Secretary Ben Wallace.

Hunt will deliver the Government’s fiscal plan on October 31, a statement he has admitted will be more akin to a full Budget. Bank of England governor Bailey, who spoke to the new chancellor on Friday, yesterday warned interest rates may have to be raised higher than initially expected to tackle inflation which is driving cost of living pressures.

Speaking to delegates at the headquarters of the International Monetary Fund in Washington, Bailey said that UK financial markets had seen “violent moves” in recent weeks and that the Bank of England had stepped in with a pledge to buy government debt to deal with “a threat to the stability of the financial system”.

Bailey said: “We will not ­hesitate to raise interest rates to meet the inflation target. And, as things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August.”

While Hunt was doing a round of media interviews yesterday, Truss was spending the weekend at the prime minister’s country house, Chequers, attempting to shore up her position amid speculation she could be ousted, possibly within days.

A brief press conference to announce the dismissal of Kwarteng on Friday was considered unconvincing by many Tory MPs who fear the prime minister has irredeemably lost all credibility after sacking her chancellor for introducing measures she campaigned for during the Tory leadership race as a series of U-turns cancelled many of the unfunded tax cuts announced in their mini-budget.

Her meeting with the ­backbench 1922 Committee on Wednesday, intended to shore up support among her backbenchers, was compared to a “drive-by shooting” by one MP who spoke to The Sunday Post.

The MP said: “It was the worst meeting of any 1922 Committee with the prime minister that I have attended, and I am now on my third prime minister.

“It was like a drive-by ­shooting. Very senior backbenchers were scathing in their criticism of the prime minister. It was quite clear she did not have anywhere close to the support of the majority of MPs in that room, which means she does not have the support of the majority of MPs in the House of Commons. I don’t know what happens next but we can’t go on like this.”

The MP said some of the measures in the mini-budget needed to be reversed for the good of the country and the economy.

“But by doing that, all her credibility is shot because she will be seen as doing a U-turn on her headline policies,” the MP said. “It is a no-win situation and I don’t think it can go on for much longer.”

Will Walden, Boris Johnson’s director of communications when he was mayor of London, called Hunt an effective “caretaker prime minister”, while former Conservative leader Lord Hague warned Truss’s premiership “hangs by a thread”.

Meanwhile, David Mellor, former chief secretary to the Treasury, told GB News that Truss was “undoubtedly toast”. He said: “If the Conservative Party has any capability to save itself, they will have to tell her to go.

“The other thing is, it’s quite interesting that the Conservative Party was not able to organise the last leadership election. It spent weeks whittling down the number of candidates and then it went to the Conservative Party membership.

“I first joined the Conservative Party 55 years ago. The Conservative Party is supposed to know how to run the country. What is quite clear is the Conservative Party doesn’t even know how to run itself at the moment. How can they?

“Firstly, Truss has got to go and, secondly, they cannot have a shambles, like this ridiculous prolonged leadership election. They’ve got to do something very quickly. And if they can’t organise themselves, then they’ve got real problems.”