Jeremy Hunt, the new Prime Minister in all but name

The irony is beyond parody. To appease her critics Liz Truss has sacked her low-tax minded Chancellor Kwasi Kwarteng and replaced him with Jeremy Hunt who once believed in cutting taxes even deeper than either of them.

In his bid to be Tory leader in this year’s leadership election Britain’s new chancellor – and the fourth this year – was the most radical of the tax-cutters among the challengers. 

Explaining his pitch to be PM to replace Boris Johnson, to whom he was runner-up in the leadership election before this one, Jeremy Hunt told a BBC interviewer: “I want to cut all taxes. The way we do that is to get the economy growing, get businesses making more profits, paying more tax.”

He went on: ”I have … endorsed tax cuts that we can do within our current fiscal rules if we spread them over a five year period. That means that our national debt continues to fall as a proportion of our output … we shouldn’t be cutting taxes if we’re loading up debts on future generations.”

More specifically, Hunt told another interviewer: “Corporation tax cuts are not sexy, but necessary”. Indeed, he went further than all the candidates – including Liz Truss – in that Hunt was not only going to delay the rise in corporation tax from 19% to 25%  but that he would slash it to 15%. 

What does the former health and foreign secretary believe now ? His new boss at No 10 has just confirmed that she is doing another U-turn and will raise the tax after all, a hike which she now says will bring in £18 billion.

If you were to be purist about judging Hunt’s one-time tax-cutting principles you could say that he did at least precis his remarks by saying that they should not be “unfunded” and delivered without increasing national debt. But if you want to be pernickety, you could argue that there is no such thing as an “unfunded” tax cut: you simply cut taxes and make up the balance by either borrowing more or growing more revenue. Which is why the “unfunded” part of the row over the tax-cutting mini-budget has been something of a red herring because it can mean what you want it to mean.

In contrast, Kwarteng’s great mistake was to announce his high-growth low-tax agenda without providing the proper framework behind the numbers and without the endorsement of forecasters such as the OBR. Apart from the 45p cut in tax and lifting the bankers’ bonus cap, there was ironically very little else in the budget that either Tory MPs – or indeed the opposition, or the markets – objected to. 

Kwarteng and Truss made a far greater mistake. That was holding the mini-budget in the first place: it simply was not necessary to announce any such changes with the UK economy already in crisis facing higher inflation and higher interest rates. There was no need: they had just revealed a mammoth emergency energy package which helped bring some reassurance.

So rather than launch their risky mini-budget, they should have enjoyed the praise for the energy package, gone for tea with MPs from all the various Sunak/Mordaunt factions, gone through the numbers and presented – with the OBR in tow – some sort of Autumn Statement in November. And concentrated on securing more energy supply.

Instead, they acted like anarchist students staging a coup at the student union, forcing out the old-timers, and presenting their new deal without bringing their audience along with them. If politics is theatre, then the actors have to impress the audience and invite them to listen to a story of an exciting future in which new measures to spur growth would unleash Britain’s “animal spirits.” 

Trouble was the words were badly chosen: growth as a term is about as dull as ditchwater and was never likely to be greeted with an ovation. Describing something like a healthier, more dynamic economy in which everyone shares the fruits might have worked. But Truss, while she means well,  is not the greatest of orators and failed to capture the mood.  

Yet you can see what they hoped to do and it was a totally understandable ambition but one executed naively and brashly. 

What’s more damning is that Team Truss knew the global economy is on the edge following Russia’s war on Ukraine hitting energy prices, while the long tail of supply chain logjams from Covid days are still playing out. 

They knew that the UK was not alone in facing such crises: the US Fed’s Jay Powell had made it crystal clear in August that he would do what it takes to crush inflation, that the era of compressed interest rates held down by QE was over, that mortgage rates were soaring in the US while the eurozone countries are perilously close to recession. 

New numbers out today show bond yields rising there too. Not surprisingly, the euro is now falling against the dollar even more sharply than the pound is against the greenback while the eurozone countries have just reported a massive trade deficit in August.

For months now the financial markets have been both fragile and volatile. Bond yields everywhere in the Western world have been on the way up on the back of higher interest rates so it was only a matter of time for there to be a problem. In that sense, the UK has put itself out front, in the wrong way. Pension funds had so gorged themselves on exotic Limited Driven Liability interest-rate swaps that they were caught out by the sudden rise in rates, causing market turmoil.  

Truss and Kwarteng were not to know about the pensions bomb waiting to explode – although the regulators and indeed the Bank of England should have.  But timing is everything in politics.  So when Kwarteng’s budget landed on Friday three weeks it frightened the markets.

What happens now? Will Sunak-backer Hunt – who has just effectively become the real deputy Prime Minister, and Prime Minister in all but name – help bring some much sought after “credibility” to not only the Truss administration but the Tory party more broadly, reassuring investors and the public?

What we do know about Hunt since he left his role as one of the most controversial health secretaries is that he was someone who is prepared to say he got it wrong and argue for change.

In his book, Zero, subtitled Eliminating Preventable Harm and Tragedy in the NHS, he sets out a huge ambition on how the NHS can reduce the number of avoidable deaths to zero, and save money, reduce the process and improve working conditions.

These are fine words, but it’s easy to criticise him. Why didn’t he do more while he was in charge of the NHS for six years to reform the service? Yet that even bothered to write the book suggests he does at least show he is someone who learns from experience, and is not frightened to say so.   

This weekend, Truss is now battling to calm Conservative MPs and persuade them to back her. The situation is so dire that, as one MP told the BBC earlier today: “It’s checkmate, we’re screwed.” 

It’s brutal. Under the cover of forcing Truss to sack her chancellor, the most senior of Tory ministers and their donors and supporters, may have begun the process of regicide, again.

Hunt is already the de facto caretaker PM. Is he, wearing his white coat and carrying a taser, together with his supporters ready to carry Truss off into the night? Perhaps it is time, as TS Elliot wrote, to say: Good night, ladies, good night, sweet ladies, good night, good night.

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