The rescue operation for British Conservative Prime Minister Liz Truss is in full swing. On Friday, the brand new occupant of 10 Downing Street had used her economy minister and longtime friend Kwasi Kwarteng as a fuse in the face of the serious mistrust of the financial markets towards her economic policy.
Monday, October 17 in the morning, to everyone’s surprise, his successor Jeremy Hunt unveiled his first budgetary decisions, when they were only scheduled for October 31. His goal : “Reduce unnecessary speculation” and especially “provide certainty on the sustainability of public finances” to calm the markets.
The end of “Trussonomics”
During his short televised speech, the new Chancellor of the Exchequer put an end to the economic program established by the Truss-Kwarteng duo, dubbed “Trussonomics” by the British media. “We will come back to almost all the tax measures announced in the growth plan three weeks ago, that is to say those which have not started their parliamentary journey”, he said straight away.
During the presentation of his budget in the House of Commons on September 23, Kwasi Kwarteng, supported by an uplifted Liz Truss, had put forward two measures: the abolition of the 45% tax bracket on income above 150,000 pounds (173,000 €) and the reduction of the first tax bracket from 20% to 19%.
While acknowledging that these were measures “deeply conservative (…) that people should keep more of the money they earn,” Jeremy Hunt indicated that“at a time when the markets are rightly demanding a commitment to sustainable public finances, it is not right to borrow to finance this tax reduction”.
Top 10% richest losers
Their first flagship action had already been canceled on October 3, in a first attempt to calm the markets. The second was therefore on Monday and for a period “undetermined”. The whole of this reversal cancels 32 billion pounds (37 billion euros) of reduction in financial income for the State. The richest 10% turn out to be the main losers: their average tax reduction goes from 5,380 pounds to 1,650 pounds, according to calculations by the think tank Resolution Foundation.
All that remains of the initial plan is the abolition of the increase in social security contributions decided by former Prime Minister Boris Johnson to help repay the debt contracted during the Covid-19 pandemic, and the reduction of the British equivalent of the tax. land registration. Maintaining them will cost the state 16 billion a year, according to Treasury estimates.
Reduction of the energy bill
Jeremy Hunt also wanted to reassure the British: the reduction of 400 pounds in their energy bill put in place by the previous government of Boris Johnson in September to help them cope with the doubling over one year of the price of electricity and gas “will not be modified”.
Which is correct on the form, but not in the calendar: it will not be maintained beyond the month of April, end of the British fiscal year, when it was initially supposed to last two years… According to the British press , it could then be more targeted, because of its high cost for the public coffers (15 billion pounds).
True prime minister bis
The intervention of the Minister of Finance aimed both to give more latitude for budgetary action and to save a government that was only forty days old… “He got rid of Trussonomics to take the pressure off the Bank of England. Otherwise it would have had to raise its interest rates in the face of market mistrust, explains Torsten Bell, director of the Resolution Foundation think tank and former economist. If rates fall by 0.5 points, that will mean £8 billion less interest to be paid on the debt. » In fact, the pound sterling has regained ground against the dollar, and government bond rates have fallen slightly.
And even if Liz Truss has won a little respite after the multiplication of calls for her resignation, she remains very fragile. Conversely, Jeremy Hunt is a real Prime Minister bis. Until he officially takes his place, if the anger of the deputies were to continue and push her to resign?
UK trade unions make their voices heard again
As the Trade Union Congress, the main trade union platform in the United Kingdom, begins its annual congress on Tuesday 18 October, the country is indeed preparing for a new “winter of discontent”. In recent months, in addition to railway sector employees, workers from the private telecommunications group BT (ex-British Telecom), many airlines, the now private postal company Royal Mail, dockers and lawyers have gone on strike. Firefighters, teachers, paramedics and therefore nurses are preparing for it.
This accumulation of strikes is surprising in a country renowned for the decline of its trade union movement since Margaret Thatcher came to power. But the purchasing power of the British has stagnated over the past twenty years.