Britain's new chancellor has mollified the markets for now but painful decisions still lie ahead
, had well and truly spooked. Britain’s currency and its government debt cratered in the wake of the growth plan that Mr Kwarteng laid out on September 23rd. The gilt sell-off was so sharp that it forced some pension funds into fire sales, creating a self-reinforcing feedback loop and threatening financial stability. An emergency bond-buying programme from the Bank of England, along with Mr Kwarteng’s defenestration, went some way to restoring order.
It has bought some much-needed breathing-space: the 30-year gilt yield, which breached 4.8% on Friday, fell back to 4.4%. The pound, worth less than $1.12 on Friday, rose to around $1.14. But the price of all this has been the wholesale destruction of the tax-cutting agenda that brought Ms Truss to power. She had already announced the reinstatement of a corporation tax rise she had previously promised to scrap .
More pain is to come. Mr Hunt also promised a review of the blank cheque the government signed in offering to protect households and businesses from higher energy costs, aiming to make it more targeted and less expensive after April 2023. Prior to his statement, Britain’s public finances faced a hole in the medium term reported to be around £70bn per year. Taken together, the chancellor’s announcements may take that shortfall down to around £40bn.
Mr Hunt’s extraordinary elevation has been as striking as Ms Truss’s political implosion. After two unsuccessful tilts at the party leadership, until a fortnight ago his career in high office seemed to be over. He finished second, behind Boris Johnson, in the Conservative Party’s leadership contest in 2019. In the contest of 2022 he gathered the support of just 18 MPs.
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