Mistakes have been made, tax increases are coming

LONDON – Britain’s new finance chief on Saturday acknowledged mistakes made by his predecessor and suggested he could reverse much of Conservative Prime Minister Liz Truss’ tax cut plans to bring stability to the country after weeks of economic and political turmoil.

Jeremy Hunt, who was hired on Friday to replace Kwasi Kwarteng as chief financial officer and restore order to Truss administration, warned of “difficult decisions” ahead. He said taxes could rise and public budgets are likely to be squeezed further in the coming months.

Truss fired Kwarteng on Friday and dropped her promise to scrap a proposed corporate tax hike as she tried to keep her job — after just six weeks in office.

Truss, a free market libertarian, had previously insisted her tax cut plans were what Britain needed to spur economic growth. But a “mini-budget” she and Kwarteng unveiled three weeks ago, which promised £45 billion ($50 billion) in tax cuts without explaining how the government would pay for it, left markets and that British pounds are falling, leaving their credibility in tatters.

The policy, which included reducing income tax for those with the highest incomes, was also widely criticized for being dormant in the face of Britain’s cost-of-living crisis.

Hunt said Truss acknowledged their mistakes and he will correct them.

“It was wrong to lower the top tax rate for the highest earners at a time when we are asking everyone to make sacrifices to get through a very difficult time,” Hunt told the BBC on Saturday.

“And it was wrong to fly blind and announce these plans without reassuring people with the discipline of the Bureau of Budgetary Responsibility that we can actually afford to pay for them,” he added. “We have to show the world that we have a plan that pays off financially.”

Hunt also hinted that taxes could go up and “it’s going to be tough.”

“Spending will not increase as much as people would like and all government agencies will have to find more efficiencies than they planned. And some taxes aren’t going down as fast as people want,” he said.

Hunt, who ran twice in Conservative Party leadership contests, is a veteran lawmaker who has previously served in senior government posts, including Secretary of State.

His comments on Saturday suggested he could scale back many of the economic pledges that Truss fought for and tried to implement in her first few weeks in office.

Truss’ position remains fragile. She has faced intense pressure from across the political spectrum, including reports that senior members of her Conservative Party were plotting to oust her.

On Friday, she avoided repeated questions about why she should remain in office when she and Kwarteng shared responsibility for the government’s economic plan and the consequences it unleashed.

“I am absolutely committed to delivering on what I promised,” she said.

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https://www.local10.com/business/2022/10/15/new-uk-treasury-chief-mistakes-were-made-tax-rises-coming/ Mistakes have been made, tax increases are coming

Sarah Y. Kim

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