Jeremy Hunt warns spending cuts to restore Britain’s economic credibility

Jeremy Hunt, Britain’s new Chancellor, has admitted taxes must rise and spending must be cut after Prime Minister Liz Truss failed to calm markets with a U-turn on corporate tax cuts.

In his first interviews since replacing Kwasi Kwarteng, who was sacked by the prime minister on Friday, Hunt buried the final bits of Truss’ low-tax economic strategy and admitted that some “very difficult decisions lie ahead.”

“Taxes are not going to go down as much as people hoped and some taxes need to go up,” he told the BBC today programme, adding: “If we are to fund the NHS and our public services and keep taxes down, we need to solve the growth paradox.”

Gilt markets were hit by another sell-off on Friday afternoon after an abrupt eight-minute press conference by Truss at Downing Street, and Whitehall braces for more turmoil when markets reopen on Monday.

A senior Whitehall official said: “Clearly what Liz has done is not enough, there will be more U-turns and more pain. I don’t think they realized it could get any worse.”

Despite Truss Hunt having instructed there would be no further U-turns on last month’s disastrous ‘mini’ budget, the new Chancellor told the BBC on Saturday that he would be ‘completely honest with the country’ on the crisis and spending cuts make would be required.

“I will urge all government agencies to find additional efficiency savings,” he said. “[There will be] tough spending decisions that won’t increase as much as people are hoping.”

Hunt declined to say whether household benefits would increase in line with inflation. He said, “I am very sensitive to the needs of people at the bottom of the income scale and I will not make that commitment within hours of taking this job.”

The Chancellor told Sky News the government will “not achieve the speed of tax cuts” she had hoped for, but insisted there would be no return to big austerity measures. “I don’t think we’re talking about austerity in the way we had it in 2010. But we will have to make hard decisions on both spending and taxes,” he said.

A cabinet minister questioned whether Hunt’s promise was credible. “I don’t see any major package of cuts going through the House of Commons. If MPs don’t vote for it, it’s not credible and markets will reject it,” he said.

Hunt slammed Kwarteng for two big “mistakes”, saying it was “wrong” to cut the top 45p income tax rate and “fly blind” without full cost absorption by the Office for Budgetary Responsibility. Both measures would be “fixed”, said the Chancellor.

Any further U-turn by the government is likely to further jeopardize the prime minister’s position. Some senior MPs predicted she would struggle to survive the current crisis.

A veteran MP said: “Your project or your prime ministership is pointless now, it feels like it’s already over.”

Another senior Tory MP predicted that no-confidence letters against Truss would “reach a critical point in the very near future” which would force Sir Graham Brady, the chairman of the 1922 backbench committee, into action.

The Times reported that Kwarteng believes Truss only has “a couple of weeks” left as prime minister.