Rishi Sunak takes advantage of the calm in the markets to delay his long-awaited fiscal plan | International
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Rishi Sunak is confident that the good reception that the markets gave to his appointment as leader of the British Conservatives, and as Prime Minister, will provide him with some respite from the difficult days ahead. For now, the first decision he has taken this Wednesday has been to delay the fiscal and budget plan that the previous government had promised to present next Monday, October 31, for more than two weeks. It was the commitment adopted by Jeremy Hunt, whom Sunak has confirmed in his position as finance minister, after knocking down most of the reckless tax cuts announced by former prime minister Liz Truss.
The presentation will now be on November 17. The new prime minister and Hunt have made the decision in the early hours of Wednesday. The minister assumed the responsibility of making it public: “It is extremely important that the plan be based on the most accurate forecasts possible for public finances”, he justified, given what might seem to investors to be another rectification or backtracking, similar to those of the last few weeks. “I want to confirm that we will be able to demonstrate our commitment to lower public debt in the medium term, something that is really important for people to understand,” said Hunt.
The date previously chosen for the presentation had a clear purpose: to convey confidence, three days before the meeting of the Monetary Policy Committee of the Bank of England, on November 3. The current interest rate stands at 2.25%, but the storm unleashed by the Truss government, with its massive tax cut, accelerated fears of a rapid rise in the price of money. Some analysts even suggested that it would reach 6% early next year. Hence, the British monetary authority prefers not to have to decide within eight days.
The fiscal plan – which will now be more complete, to become the usual autumn budgets, as announced by the Sunak government – will contain a detailed explanation of income and expenses, and, therefore, of possible tax increases and new cuts. Downing Street is obliged to explain to investors and the main economic institutions how it is going to begin to reduce the hole of more than 46,000 million euros in public debt caused by the recklessness of the previous government. The plan will also be accompanied by the independent report from the Office of Budget Responsibility that Truss declined to request when he presented his bill.
Sunak trusts that the calm and predictability transmitted by the tandem formed by himself and his minister Hunt will help reduce the pessimism of the economic forecasts, partially curb the impetus of the Bank of England to raise interest rates, and allow the Government not having to make excessive tax cuts or increases, which would once again stir the waters among Conservatives and be unwelcome by voters. For the time being, the pound has remained strong against the dollar on Wednesday, although long-term government bonds have lost some value, failing to recover the levels prior to the catastrophic announcement of the tax cut.
First control session
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Sunak has also made his debut this Wednesday in the control session of the House of Commons, which has faced the leader of the Labor opposition. Keir Starmer has, first of all, had the courtesy to welcome his rival, and celebrate “the significant moment in our national history” that was the presence in Downing Street of the first Briton of Indian origin. “A reminder that despite all the challenges this country faces, the UK is a place where people of different races and beliefs can fulfill their dreams.
A brief gesture of concord before entering the charge, mercilessly, against the errors and contradictions of a Prime Minister who has been part of the Government for years and drags his own baggage. Starmer reminded him, without naming him, how his billionaire wife, Akshata Murty, took advantage of the “non-resident” tax regime in the United Kingdom for years. In 2021, after obtaining 14 million dividends from Infosys shares, the company founded by his father, Narayana Murthy (he defends, unlike his daughter, the “h” in his last name), paid only 36,000 euros in taxes . The scandal forced Akshata to fix her residence in London (exactly, at 11 Downing Street, where her husband lived, at that time Minister of the Economy), and pay overdue debts with the British treasury. “This government allows the rich who live here to domicile abroad to evade taxes. I don’t need to explain to the prime minister how the non-resident status works. He knows him well,” Starmer has noted.
The opposition is also trying to build the first scandal of the Sunak era on behalf of its interior minister, Suella Braverman, representative of the right wing of the conservatives and whose support for the current prime minister last weekend, during the fight for the leadership of the party, was key to finish sinking the aspirations of Boris Johnson. Braverman justified her resignation from the Truss government, the catalyst for the precipitous end of the former prime minister, due to her own ethical failure. She had sent a fellow deputy, as she explained at the time, sensitive information about the Executive’s immigration policy through her private email, contrary to the rules of internal behavior. “The Minister of the Interior made an error in judgment, she recognized it immediately, raised the matter to whom it belonged and admitted her mistake,” Sunak defended Braverman, in the face of suspicion from the opposition and many Tories that both closed a secret pact of mutual support to block the path to Johnson.
Finally, Starmer has returned to claim an electoral advance that Sunak has rejected again, relying on the majority mandate that the Conservative Party -and not Johnson- obtained at the polls, in December 2019, which would allow him to continue governing until January 2023 .
Another bug fixed
Sunak wasted no time this Wednesday. His second important decision, after delaying the presentation of the fiscal plan, has been to confirm that the fracking, the English term by which the hydrocarbon extraction technique based on hydraulic fracturing in the bedrock is known, will continue to be banned in England. It was a commitment expressed in the conservative electoral program, which maintained the veto “until science categorically demonstrates that it is a safe technique.” The new Prime Minister has confirmed in Parliament his willingness to keep that promise.
Truss insisted on reversing this decision, arguing that the United Kingdom needed to recover its autonomy and energy security, given the consequences of Vladimir Putin’s aggression in Ukraine. But fracking it is wildly unpopular with the British public, and Labor led the previous government into a deadly trap. They forced a vote in the House of Commons to reinstate the ban. Truss understood the challenge as a confidence motion and imposed parliamentary discipline on the Conservative MPs. The irritation that already existed against her on the part of many of her colleagues, and the confusion generated with the voting instructions, ended up causing an unprecedented revolt in the corridors of Parliament. Hours later, Truss presented his resignation.
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