Yesterday the FTSE 100, sterling and government bonds all strengthened following the shock reversal of almost all of Liz Truss’ fiscal strategy announced only a few weeks ago.
The Kwasi Kwarteng mini-budget saw inflation hit new highs, with a severe effect on mortgage lending, with many providers raising rates or withdrawing products altogether.
An exclusive YouGov poll found that if mortgage payments increased next year, 45% of respondents said they would have to make “significant cuts” to household spending.
It follows news that the strain on households could face further strain after Jeremy Hunt slashed the government’s energy support package by 18 months.
If interest rates were to rise again next year, 16% of respondents said they would consider selling their property.
Of those looking to switch mortgages, half were looking to switch for five years or more, indicating that many are looking for greater certainty from mortgage providers.
Jeremy Hunt’s financial plan is hoped to have a further calming effect on the economy ahead of his medium-term budget plan which will set out further measures and provide a forecast from the Office for Budget Responsibility.
As well as scrapping nearly all of the tax cuts promised by Liz Truss and Kwasi Kwarteng, Mr Hunt also announced yesterday that he was setting up a new Economic Advisory Council, made up of ‘respected economists’ and will be available to that the government consult him on his finances. Strategies.
“I look forward to working with such an esteemed group of economic experts whose advice will be invaluable,” Hunt said.
“At a time of global economic challenge and volatility, exacerbated by Putin’s unlawful invasion of Ukraine, prioritizing the UK’s economic stability is vital and will support long-term growth.”
One of the pundits, Rupert Harrison, has served as George Osborne’s chief of staff, doing little to allay fears the UK will not revert to the former Chancellor’s austerity economic model as he did between 2010 and 2015.
Labor’s Angela Eagle said the financial ‘black hole’ in funding surely meant the government was now introducing ‘austerity 2.0’, but the suggestion was rejected by the Chancellor in a heated debate in Parliament .
“I was a cabinet minister in 2010 when we had some very difficult decisions to make as a result of the financial crisis and my department’s budget was cut by 24% and I don’t think we were talking about anything. it is of this magnitude,” Hunt said. told MPs in the Commons.
“And I think it’s likely that cash spending will continue to rise but, having said that, I want to be completely frank with people – we’re going to have some very tough decisions on both tax and spending. in the next two weeks.
“We’ll try to make these decisions with as much compassion as possible, so it’s going to be difficult going forward, but I don’t expect it to be on the scale she suggests.”
Mr Hunt defended lifting the cap on bankers’ bonuses, saying: ‘We will get more tax from rich bankers with the policy we have now.’