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Who Is the New Chancellor and Why Didn’t Kwasi Kwarteng Last?

In early September 2022 Liz Truss became the new prime minister of the UK. Having been officially asked to form a new government by the late Queen, Truss appointed Kwasi Karteng as the new Chancellor of the Exchequer, replacing Rishi Sunak.

However, Karteng was only in his role for 38 days. Following his mini-budget announcement he spent most of his active duty trying to quell criticism amid economic turmoil. In this blog we will discuss Karteng’s demise and who has been appointed as the new chancellor.

Why was Kwasi Karteng fired?

If you promise tax cuts but don’t show how you intend to fund those cuts then you create a great deal of uncertainty. Karteng failed to deliver a sound fiscal policy, exercising an inability to balance the books, resulting in a state of no confidence.

As a result the markets plummeted after Kwarteng’s mini budget. This is why we have seen a number of his promises reversed and his sacking as chancellor. The markets have been spooked and until fiscal responsibility is restored borrowing costs will not return to the levels they were before the crisis.

Who is Jeremy Hunt?

Truss appointed former foreign secretary and health secretary Jeremy Hunt as the new chancellor. Hunt is a known face in politics, twice himself trying to become Conservative party leader. Having been on the back benches since Boris Johnson was appointed prime minister back in 2019, Hunt’s appointment indicated Truss wants to broaden her support amongst the Conservative ranks.

What will the new chancellor do?

New chancellor Jeremy Hunt acknowledged there were mistakes made in the mini budget delivered by Kwarteng. Hunt admitted that his predecessor made an error to fly blind by not accompanying the ‘fiscal event’ with an economic forecast by the Office for Budget Responsibility. This is what many argue sent the financial markets into turmoil. On tax cuts, Hunt stated: “We won’t have the speed of tax cuts we were hoping for and some taxes will go up.”

When questioned on austerity he said, “I don’t think we’re talking about austerity in the way we had it in 2010. But we’re going to have to take tough decisions on both spending and tax.”

What do Gaffsy think about the new chancellor?

Hunt’s comments will likely provide the markets with a degree of reassurance that someone with an understanding of what a sound economic policy looks like is back in the Chancellor’s driving seat and this should in the short term be enough to put a floor on the markets.

However, given the uncertainty surrounding PM Liz Truss’s future and by default her cabinet, we are unlikely to see borrowing costs return to the levels they were before the crisis.

Jeremy Hunt is expected to make a more detailed statement at 11am, Monday 17th October. This will be addressed at 3.30pm in the House of Commons which will be broadcast live. Whilst many of the tax cuts are expected to be reversed the changes to the stamp duty threshold look likely to remain. 

It is also confirmed that the rest of Hunt’s plan will be released on the 31st October 2022.

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