Britain's new Chancellor of the Exchequer Jeremy Hunt said some taxes could go up and admitted his predecessor made “mistakes” in a disastrous mini-budget that battered markets, the currency, mortgages and pensions.
Mr Hunt said Britain now needed stability, and Prime Minister Liz Truss needed time to tackle the crises facing the country — rampant inflation and Ukraine among them.
The warnings from Mr Hunt, in his first interview since taking the job on Friday, were in contrast to the tax cuts and borrowing mini-budget laid out by Kwasi Kwarteng and Ms Truss, which sparked panic in the markets.
Mr Hunt criticised “mistakes” of the Truss administration and said there were “difficult decisions” to come on tax and spending.
“We will have some very difficult decisions ahead,” Mr Hunt said, warning that “all government departments” face spending restraint.
“And some taxes will not be cut as quickly as people want. Some taxes will go up,” he said.
Interest rates may have to be raised higher than initially expected to tackle inflation, Bank of England Governor Andrew Bailey has suggested.
He said bank officials will “not hesitate” to raise interest rates if necessary to tackle inflation, while warning that a stronger response than anticipated could be required.
“I can tell you that I spoke to Jeremy Hunt,” he said at a G30 banking seminar in the US. “I can tell you that there was a very clear and immediate meeting of minds between us about the importance of fiscal sustainability and the importance of taking measures to do that.”
Mr Hunt said that Ms Truss has been prime minister for a matter of weeks and that the government would be judged at a national election expected in 2024.
Tax cuts financed by borrowing were the centrepiece of the mini-budget, but that has now been pushed aside with Mr Hunt refusing to comment on where he intends to spend and where he intends to make cuts.
With Mr Kwarteng fired, Ms Truss hopes she will be able to survive as prime minister, and that party MPs are able to forget or forgive — after she won the Tory Party leadership position on a promises of tax cuts.
Senior Conservative MPs are appalled at the party's collapse in opinion polls since Ms Truss replaced Boris Johnson on September 6.
“There were mistakes,” Mr Hunt said “The prime minister's recognised that, that's why I'm here.”
Two of those mistakes, Mr Hunt said, were wanting to cut taxes for the highest earners, and presenting their budget without independent forecasts from the Office for Budget Responsibility.
“It's a big honour to do the job that I've been asked to do by the prime minister but I want to be honest with people: we have some very difficult decisions ahead.
“The last few weeks have been very tough but the context, of course, is coming out of a pandemic and a cost-of-living crisis.
“And the thing that people want, markets want, the country needs now, is stability. No chancellor can control the markets.
“But what I can do is show that we can pay for our tax and spending plans, and that is going to need some very difficult decisions on both spending and tax.”
Mr Hunt did not offer any specific details of what might be contained in a highly anticipated fiscal statement scheduled for October 31, he did signal that tax rises could be coming.
Former Conservative leader Lord Hague said Ms Truss's premiership “hangs by a thread”, while Conservative former chancellor Lord Hammond said the events of the past weeks had wrecked the party's reputation for fiscal discipline.