UK Issues Urgent Financial Statement... New Chancellor Emphasizes 'Market Stability' (Comprehensive)

Jeremy Hunt, UK Chancellor of the Exchequer
Photo by Reuters Yonhap News

[Asia Economy Reporter Jeong Hyunjin] British Prime Minister Liz Truss, facing resignation pressure after withdrawing a large-scale tax cut plan, has pulled out the card of replacing the Chancellor of the Exchequer and is literally engaged in a ‘fight for survival.’ On the 17th (local time), Prime Minister Truss convened a cabinet meeting and sought to turn the tide by persuading Conservative Party lawmakers and restoring trust.

Jeremy Hunt, the new Chancellor who boarded the Truss administration as part of the ‘opposition faction,’ issued an emergency statement on the medium-term fiscal plan two weeks earlier than scheduled, stepping to the forefront to stabilize the market just three days after taking office. This came less than a day after Hunt declared in a media interview that he would overturn the existing plan presented by Prime Minister Truss and regain market confidence.

◆ Unusual 6 a.m. Statement... Effort to Stabilize Market

According to the Guardian and BBC on the 17th, the UK Treasury issued an urgent statement that Chancellor Hunt would make an announcement regarding the medium-term fiscal plan. Reports indicate that before explaining to lawmakers in the House of Commons in the afternoon, Hunt planned to announce new measures to address the fiscal deficit.

The UK government initially moved the medium-term fiscal plan announcement from the 23rd of next month to the 31st of this month, and then advanced it again by two weeks. When the UK Treasury unveiled the mini-budget last month, which included a ?43 billion (about 68 trillion won) tax cut plan, it did not present a fiscal forecast. This was the first time the UK government released a budget without a fiscal forecast, which subsequently caused significant market turmoil.

The Treasury explained, "This (today’s announcement) comes after conversations between the Prime Minister and the new Chancellor over the weekend following the Prime Minister’s statement last Friday (14th), aimed at ensuring sustainable public finances that support economic growth." It also added that Chancellor Hunt met with the Governor of the Bank of England (BOE) and the Director of the UK Debt Management Office (DMO) to discuss related matters."

[Image source=Reuters Yonhap News]

The reason the UK government is rushing to announce the medium-term fiscal plan is to prevent market turmoil. Even after declaring the withdrawal of the tax cut plan, the British financial market continued to be unstable, with the pound and government bond prices plunging. This led to a consensus between Prime Minister Truss and Chancellor Hunt that the situation must be stopped. The Treasury’s announcement at 6 a.m. local time is interpreted as reflecting this background. The Guardian described it as ‘highly unusual.’

The pound’s value rose nearly 1% in the Asian market that day and maintained this trend after the Treasury’s announcement. It was also the first trading day since the BOE ended its emergency bond-buying program on the 14th to stabilize the market.

◆ Hunt: "Will Seek Efficiency Measures... No Option Excluded"

Emerging as a key figure influencing the political situation, Chancellor Hunt reversed Prime Minister Truss’s previous statements by announcing, "Some taxes will be raised and government spending will be cut," signaling a shift toward austerity.

In an interview with the BBC the day before, Hunt said, "What I want to do is show the market, the world, and the people watching at home that we can properly allocate our tax and spending plans." He added that he would "require all government departments to find additional efficiency measures" and would consider all options, including postponing the introduction of the previously planned basic income tax rate cut by one year.

Hunt also addressed Truss’s ‘responsibility’ in the interview. He said that despite withdrawing the tax cut policy, Truss "still has responsibility," but "he has listened and changed. He has willingly done the hardest thing in politics, which is to change his attitude." He urged Conservative MPs to support Prime Minister Truss, warning that "the worst would be another long-term power struggle."

Following Hunt’s interview and the Treasury’s announcement, foreign media predicted that the postponement of the basic income tax rate cut, which is expected to inject ?5 billion in April next year, would be included in the announcement. The Guardian also reported, citing Treasury insiders, that the defense and healthcare budget items, which Truss had pledged to expand to 3% of GDP, would be cut.

Prime Minister Liz Truss of the United Kingdom
Photo by Reuters Yonhap News

◆ Truss, Dismissing Allies and Embracing Opposition, Engages in ‘Survival Fight’

Major foreign media describe Prime Minister Truss as ‘fighting for political survival.’ As a solution to political difficulties after withdrawing the tax cut plan, on the 14th, Truss dismissed Kwasi Kwarteng, her ‘ally’ and Chancellor, and appointed Jeremy Hunt as the new Chancellor. By embracing Hunt, who had supported former Chancellor Rishi Sunak, her rival, she played a trump card to resolve the crisis.

However, inside Downing Street, this was seen as "a move to buy time," with some saying, "Jeremy is a good person, but trust in him (Prime Minister Truss) is below zero."

Within the Conservative Party, calls for resignation erupted, with some saying, "The game is over." So far, three Conservative MPs have publicly demanded Truss’s resignation. The tabloid Daily Mail reported, citing anonymous sources, that over 100 Conservative MPs plan to submit a letter requesting a vote of no confidence in Truss to Graham Brady, chairman of the 1922 Committee, which oversees Conservative leadership elections. Former Chancellor Rishi Sunak, House Speaker Penny Mordaunt, and Defense Secretary Ben Wallace have begun to be mentioned as potential next prime minister candidates within the Conservative Party.

In response, foreign media reported the day before that Truss would be busy trying to resolve the crisis with the cabinet and political circles. Truss plans to preside over a cabinet meeting on the evening of the 17th to discuss the medium-term fiscal plan. Chancellor Hunt was scheduled to meet all Conservative MPs this week to gather opinions on the matter. At the same time, Truss will meet directly with Conservative MPs who are increasing pressure for her resignation to restore her collapsing support base within the party.

This content was produced with the assistance of AI translation services.