[Text/Observer Network Liu Chenghui] After the "mini budget" released last month triggered financial turmoil and strong criticism, British Prime Minister Tras chose Hunter as the New Finance Minister to "put out the fire." In order to rebuild confidence in the financial market, Hunter delivered a speech on the 17th local time to announce a series of fiscal plans, overturning almost all tax cuts in the "mini budget", including maintaining the basic income tax rate at 20% indefinitely, which was once the core content of the Trass tax cut plan. Hunter said the UK's top priority is to increase taxes and reduce spending to rebuild and stabilize market confidence.
After Hunter issued a statement, British Treasury bonds rose sharply, and the exchange rate of pound against the US dollar soared 1.4% at one point and is now at $1.133. Seeing that the economic plan of the Trass government was reversed, a former British cabinet minister said bluntly - there is no doubt that Trass is finished. Reuters also described in a report on the same day that the reversal of economic plans shattered Tras' credibility and even angered those lawmakers who supported her, exacerbating the crisis of Tras' resignation.
New British Chancellor Hunter delivered a speech on the 17th (BBC video screenshot)
"completely reversed"
According to the BBC and Yahoo Finance On October 17th, the new British Chancellor Jeremy Hunt delivered a TV speech on the same day, announcing the withdrawal of almost all tax cuts in the "mini budget". The move broke the initial tax cut of Tras, which was as large as £43 billion, and would save the British government 32 billion annually.
Specifically, the UK government will shelve indefinitely the plan to cut the basic income tax rate by one percentage point from April next year, maintaining it at the current level of 20%, which is expected to save the government nearly 5.3 billion pounds;
reduces a two-year energy subsidy scheme that is expected to cost more than 100 billion pounds, and replace it with another more targeted plan. The current policy will continue until April next year;
cancels the plan to cut dividend tax, which is expected to save 1 billion pounds;
cancels the new plan to provide international tourists with VAT-free shopping;
cancels the plan to cut alcohol taxes...
"We will revoke almost all tax cuts announced three weeks ago that have not yet been initiated for Parliamentary legislation." Hunter said in a televised speech, "The core responsibility of any government is to take necessary measures for economic stability." "No government can control the market, but every government needs to determine the sustainability of public fiscal policy."
"I am still very confident in the long-term economic outlook of the UK because we are gradually achieving our mission of economic growth." He added, "But growth requires confidence and stability, and the UK will always pay its own price."
According to Hunter, he will submit a complete statement to Parliament later on the 17th and announce his full plan on October 31.
After Hunter delivered a speech, Trass responded on a social platform: "The British people certainly want to achieve stability, which is exactly the time when the economic situation deteriorates. We have taken action to formulate a new growth route to provide support and services to people across the UK."
Trass posted a message on social media to respond to Hunter's speech
On September 23 this year, the Trass government, who had taken office less than a month ago, announced the most radical tax cut plan in the UK since 1972. Specific measures include cutting national insurance, abolishing and raising corporate tax plans, and reducing stamp duty on purchasing real estate. However, as soon as this policy was announced, it was questioned and criticized by the outside world, causing market turmoil. The exchange rate of the pound against the US dollar once hit a record low...
Subsequently, the Tras government made consecutive "180-degree policy turn", first withdrew one of the tax cut plans for high-income earners, and then canceled another key content in the economic plan, and eventually raised the corporate income tax rate. On October 14, in order to maintain the position of Prime Minister, Tras also announced the dismissal of his staunch ally, British Chancellor Kwoten, and appointed Hunter as the new Prime Minister.
Regarding Hunter's latest "fire-fighting" plan, Reuters called it a "complete reversal" of Tras' economic policy on the 17th.Reuters believes that turmoil in the UK's financial market has been spreading since the Trass government launched a radical tax cut plan in September. Now Hunter has withdrawn almost all tax cuts in Tras' "mini budget" that have caused market turmoil, obviously in order to rebuild investors' confidence in the UK.
"A country should not operate like this"
The economic outlook is sluggish, the inflation is high, and the new policy is in chaos...Tras, who has only been in office for more than 40 days, is in a deep ruling crisis. Some media believe that even if the British government changes the financial minister and withdraws the tax cut plan, the prospects for Tras are still not good.
Reuters said that the economic plan almost completely reversed the difficulty of maintaining credibility has also angered those lawmakers who supported her and encouraged opponents to continue to find ways to force Tras to step down.
Reuters reported: Hunter withdraws tax cuts and reduces energy support plans
In addition, BBC reporter Nick Eardley quoted a former British cabinet minister on the 17th as saying that Hunter's latest economic statement confirmed that Tras is finished, and there is no doubt.
"What is the significance of Trass (as Prime Minister)? This is the crux of the problem...it doesn't make any sense," he said.
Another MP also said that the reversal of economic policies has caused "Tras's entire prime minister status to be crushed...she needs a way out."
The United States " New York Times " also pointed out on the 17th that after Hunter's speech, the exchange rate of British Treasury and British Pound both rose, and the exchange rate of British Pound against the US dollar soared by 1.4%. This phenomenon suggests that Tras may win herself a few more days of breathing, but her political viability remains largely questionable just six weeks after taking office. Hunter's hastily announced economic plan not only undermined Tras' agenda, but also damaged her credibility.
The New York Times reported: The new British finance minister further withdrew his tax cut plan
report also noticed that just as Hunter began to take action to control the government's economic leverage, Conservative MPs were meeting to plan ways to force Tras to step down.
According to previous news from the British " Guardian ", after the economic policy setback, the calls for resignation of Tras are increasing. Senior members of the British Conservative Party will meet on the 17th to discuss the future of Trass. Specifically, 15 to 20 former British Cabinet Secretary and other senior members of parliament have been invited to attend a dinner convened by key supporters of former British Chancellor of the Exchequer Sunak to discuss “how and when to remove Tras”. Some of them hope she can resign within a few days to save the Conservative Party, and others say that although Tras is in office, he is "unable to control the situation."
The Guardian of the United Kingdom: The Conservative Party’s senior management will discuss the removal of Trass to save the party
Tras’s own experience reflects the current dilemma in Britain to a certain extent. Bloomberg reported on the 16th that Goldman Sachs analysts quickly lowered the outlook for Britain's economic growth after Tras replaced the Chancellor of the Exchequer and adjusted the tax cuts.
Goldman Sachs pointed out in a report, "Given the weakening growth momentum, a clear tightening of financial conditions, and a higher corporate tax imposed from April next year, we have further lowered our economic growth expectations, and now we expect a more severe recession in the UK." Goldman Sachs' annual growth forecast for the UK in 2023 has dropped from -0.4% to -1%. For now, Goldman Sachs expects the UK core inflation rate to be 3.1% by the end of 2023, compared with 3.3% before.
The British "Sky News" quoted historian Anthony Seldon as saying that the UK is currently experiencing an "unprecedented" period, replacing four Chancellors within 4 months, at an unprecedented speed. Once British Prime Minister changes again in the short term, the current situation will undoubtedly become more serious. He pointed out that in such a short period of time, Britain had changed so many ministers and prime ministers, and even the monarchs had changed their positions, which gave the outside world a horrifying impression. “If it were really a change of prime minister, it would really bring Britain into a place where no one was involved, because a country shouldn’t be operating like this.”
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