The new chancellor has turned into an insolvency practitioner
If Jeremy Hunt needs a new career after the next election, he’d make an excellent insolvency practitioner. I don’t mean anything so crude as a cudgel-wielding debt collector, but rather a post in the Insolvency Service — the state agency that manages company liquidations and personal bankruptcies.
Arguably, Hunt had already made a start. He’s not so much the Chancellor of the Exchequer, but rather the official receiver for a bankrupt government. According to the GOV.UK website, official receivers (ORs) are appointed by the Insolvency Service to carry out three main tasks.
Firstly, they “collect and protect assets for creditors”. This was the primary purpose of the Chancellor’s financial statement today. The creditors of a government are the money markets — whose assets are bonds (i.e. a promise on the part of a government to repay a given amount, after a given number of years, at a given rate of interest). The value of those bonds rise and fall depending on various factors — the most important of which is the perceived sustainability of a government’s borrowing.
Therefore, Hunt’s overriding objective is to protect UK bond values by shoring-up our public finances. Primarily, that means reversing almost all of the tax cuts announced in the catastrophic mini-budget. The government has already announced that the top rate of income tax will stay in place and that the cancellation of the planned rise in corporation tax has itself been cancelled. But as well as those climb-downs, Hunt has also nixed other Truss giveaways, including the reduction in the basic rate of income tax, which will stay at 20% indefinitely.
As for the massively expensive Energy Price Guarantee, this will now only last for one winter — not the two as previously promised. There’ll be a Treasury review into what replaces it, but Hunt made it clear it won’t be nearly so generous.
The second task of an official receiver is to “find out the reasons for the insolvency”. In this regard, Hunt more or less admitted it. He opened with the words “a central responsibility for any government is to do what’s necessary for economic stability”. By explicitly renouncing most of mini-budget, his implication is that Truss has failed in this duty.
The third task of an official receiver is to act as a “trustee or liquidator” for the bankrupt enterprise in question. And that too is what Hunt did today. A little over a week ago, the Tory leader used her conference speech to proclaim that the priorities of her government were “growth, growth and growth.” Though the Chancellor paid lip service to her growth plan today, he also insisted that the most important objective was “stability” and that in making the consequent tough choices the priority was protecting the “most vulnerable”.
So that looks like three priorities to me — of which growth is only one. So, even if the country has been saved from financial ruin, it is clear that Liz Truss’s political project is a busted flush.