The newly appointed Chancellor, Jeremy Hunt has today unravelled much of Kwasi Kwarteng/Liz Truss’s disastrous Mini Budget.
Markets had already reacted badly with proposed tax cuts to stimulate growth but not clear plan for how this was being funded. The pound virtually collapsed, and the Bank of England had independently to intervene by buying back UK Gilts (UK debt stock) with capital values falling and the cost of UK government borrowing escalating. In short, investors around the world had no confidence in Kwarteng/Truss’s ability to manage the UK economically and repay its debts.
Truss has since sacked Kwarteng and now replaced by Hunt. An experienced, steady hand many will say. Mr Hunt’s first actions as Chancellor today were:
It is estimated that Kwarteng’s original proposals would have cost £77bn (reduced taxes £32bn and additional borrowing £45bn) but the above changes will reduce the ‘black hole’ to £32bn meaning more is to come in the main Autumn Budget on Monday 31 October 2022.
Comment
Whilst the above may initially calm markets, we cannot see trust being recovered with Truss coming under increasing pressure and no doubt the Autumn Budget will carry some fireworks given inflation likely to be over 10% tomorrow and this the rate that State Pension and benefits increases are usually set to increase in April 2023.