Welsh Government won’t be able to protect people from ‘full force’ of Hunt austerity, they say
The Welsh Government won’t be able to protect people from the “full force” of new Chancellor Jeremy Hunt’s programme of austerity, they have said.
Finance Minister Rebecca Evans said that it was “inexcusable” that the public finances were in a worse state due to the UK Government’s mini-budget.
She added that yhe Welsh Government will publish its own new budget on 13 December.
“While we will not be able to protect people and services from the full force of the UK Government’s actions, we will do everything we can to help households, services and businesses through this crisis,” she said.
“While our resources are limited, and today’s announcement will do nothing to alleviate the already challenging funding position facing the Welsh Government, our priority will be to shield the most vulnerable and create a stronger, fairer and greener Wales that safeguards the wellbeing of our future generations.”
Rebecca Evans added that the economic outlook was already challenging, as a result of EU exit, the pandemic and cost-of-living crisis.
“But the perilous situation which the UK’s public finances are now in is inexcusable,” she said.
“This is a direct result of the flawed and reckless measures announced in the UK Government’s mini-budget on 23 September and which were the central pillar of the Prime Minister’s leadership campaign.
“The fall-out from the mini-budget has been mayhem in the financial markets; mortgage costs have risen sharply, as has the cost of government borrowing; the Bank of England has had to take extraordinary measures to prevent a collapse in pension funds; and household budgets have been stretched even further.
“Our economy and UK finances are now in a far worse situation than they were less than a month ago as a result.
“The Chancellor’s statement today has signalled a new era of austerity.
“Those hit hardest will be the households already struggling to make ends meet. Our public services are facing cuts, and jobs could be lost. The actions announced by the Chancellor will shrink the economy and make the recession deeper and last longer – the opposite of the so-called plan for growth.”
“While the Chancellor stated the UK Government’s priority in making the difficult decisions that lie ahead will always be the most vulnerable, he offered nothing of comfort to them today.”
Rebecca Evans added that the announcement of changes to energy support only created additional uncertainty for households and businesses which were already worrying about costs.
“The UK Government has repeatedly failed to take opportunities to improve our energy security for the future and address the climate emergency. It must be more ambitious on investment in green energy and decarbonisation,” she said.
“The Chancellor must use his 31 October statement to provide reassurance that we will not see spending cuts that will affect public services, jobs, and our economy.
“Instead, he has a real opportunity to provide much-needed support to the most vulnerable, funded by using the UK Government’s tax levers more equitably, including taxing the windfall gains in the energy sector.
“Inflation has already significantly eroded the Welsh Government’s budget settlement to worryingly low levels. This Statement continues to fall far short of what is needed to meet the very significant challenges faced by our public services and workers. The UK Government must provide us with the additional budget flexibilities to support our response in Wales.”
Chancellor Jeremy Hunt had warned that “eye-wateringly difficult” decisions were needed as he tore up Prime Minister Liz Truss’ economic strategy.
Mr Hunt scaled back the energy support package and ditched “almost all” the tax cuts announced by his predecessor Kwasi Kwarteng less than a month ago, as he tried to restore economic stability after weeks of turmoil on the financial markets.
Ms Truss became Prime Minister after winning the Tory leadership contest on the back of promises to dramatically cut tax, and the wholesale abandonment of the policies has left her fighting for her job after just six weeks.
She sat next to her new Chancellor in the Commons, staring straight ahead as he ditched huge chunks of her plan.
After around 30 minutes, she walked out without having said a word.
Moments before her appearance in the chamber, the Prime Minister met 1922 Committee chairman Sir Graham Brady, who is likely to have brought up her lack of support among Tory MPs.
Mr Hunt’s measures included:
- Announcing the plan to cap the cost of energy for all households for two years will now end in April, with targeted help beyond that for those most in need.
- Scrapping April’s planned 1p cut to the basic rate of income tax, which will stay at 20p indefinitely, raising an extra £6 billion a year.
- Ditching a 1.25 percentage point cut in dividend tax planned for April, worth around £1 billion a year to the Exchequer.
- Dropping plans to ease IR35 rules for the self-employed, saving around £2 billion.
- Axing a new VAT-free shopping scheme for overseas tourists, which will save around £2 billion.
- Reversing a decision to freeze alcohol duty rates from February, worth around £600 million a year.
The Government had already abandoned plans to scrap the 45p rate of income tax for top earners and had U-turned on a promise not to increase corporation tax.
The changes dramatically cut the cost of Mr Kwarteng’s £45 billion tax giveaway, reducing it by around £32 billion.
Mr Hunt told MPs: “We are a country that funds our promises and pays our debts and when that is questioned – as it has been – this Government will take the difficult decisions necessary to ensure there is trust and confidence in our national finances.
“That means decisions of eye-watering difficulty.”
He said “every one of those decisions, whether reductions in spending or increases in tax”, would be shaped by “compassionate Conservative values”.
Financial markets, which had been spooked by the prospect of unfunded tax cuts on top of emergency interventions in the energy market and the cost of Covid-19 support, appeared reassured by Mr Hunt’s announcements.
The pound and UK Government bonds rallied in response to Mr Hunt’s measures, while economists suggested the Chancellor’s approach may reduce the need for dramatic interest rate rises.
Plans to cut national insurance contributions and a reduction in stamp duty, which are already going through Parliament, will continue.
Senior Conservative MP Mel Stride predicted public spending cuts to health, social care and pensions, saying the Chancellor is “under half way” to plugging the fiscal hole.
“Without leaning into spending in a meaningful way, it’s very difficult to see how he’s going to close that gap down,” he told BBC Radio 4’s PM programme.
Mr Hunt’s statement on Monday morning, fleshed out with more detail in the Commons with Ms Truss watching on, sounded the final death knell for the Prime Minister’s free market experiment – dubbed “Trussonomics” – to kick-start economic growth through a programme of swingeing tax cuts and radical deregulation.
Ms Truss said the Government was taking action to “chart a new course for growth that supports and delivers for people across the United Kingdom”.
But senior Tory backbencher Sir Charles Walker became the fifth Conservative MP to publicly call for her to stand down.
He told Sky News: “I think her position is untenable. She has put colleagues, the country, through a huge amount of unnecessary pain and upset and worry.”
The situation “can only be remedied” with “a new prime minister”, he added.
Under current party rules Ms Truss is protected from a leadership challenge for 12 months, but that could change if enough Tory MPs demand it.
Former chief whip Andrew Mitchell said the Prime Minister had just a fortnight to save her premiership and “if she cannot do the job, she will be replaced”.
At a meeting with the moderate One Nation Conservatives group in Parliament on Monday evening, Ms Truss acknowledged “mistakes have been made”, according to Conservative Party chairman Jake Berry.
“The Prime Minister started by saying that mistakes have been made, she acknowledged them, she is bringing the party together,” he told reporters.
“Colleagues who were there (were) very heavily focused on unity.”
She ducked a parliamentary clash with Labour leader Sir Keir Starmer, instead sending Commons Leader Penny Mordaunt – viewed as a potential successor – in her place.
Sir Keir accused the Prime Minister of “hiding away, dodging questions”, adding: “The lady is not for turning… up.”
Ms Mordaunt assured MPs “the Prime Minister is not under a desk” or hiding to avoid scrutiny, and denied there had been a “coup” to remove her.
The encounter came as Labour opened up a 36-point poll lead, the largest for any party since October 1997, according to a survey of 2,000 eligible voters by Redfield and Wilton Strategies.
Downing Street insisted the Prime Minister remains in charge despite Mr Hunt tearing up her flagship growth plan.
But allies acknowledged it was a crucial 24 to 48 hours for her premiership.
With discontent spreading throughout the party, the difficulty facing MPs seeking change is the lack of a consensus candidate they can rally around to avoid another bitter leadership contest.
Former cabinet minister Nadine Dorries said: “There is no unity candidate. No-one has enough support.”
She said only one MP has a mandate from party members and from the British public: Boris Johnson.
“The choices are simple – back Liz; if not, bring back Boris or face a GE (general election) within weeks,” she tweeted.
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