Truss lashes out at Hunt over criticism of her mini-budget
Liz Truss hit back at Jeremy Hunt after he criticised her mini-Budget and accused her of making “mistakes”.
A spokesman for Ms Truss, the former prime minister, responded by saying that the Chancellor’s decision to press ahead with an increase in corporation tax “looks like a pretty bad mistake right now”.
In his Budget earlier this month, Mr Hunt said corporation tax that the levy will go up from 19 per cent to 25 per cent in April – months after Ms Truss announced that she was scrapping the increase.
Appearing before the Treasury select committee on Tuesday morning, the Chancellor took aim at Kwasi Kwarteng’s mini-Budget in September, which sparked meltdown on the financial markets.
“Yes, there were some mistakes in the mini-Budget, which we had to reverse, and in particular I think it is clear you can’t fund tax cuts through increased borrowing,” he said. “That is a clear thing that we changed course on.”
A spokesman for Ms Truss said: “Liz was always clear that you can’t deliver economic growth and thus reduce borrowing by hiking taxes.
“Raising corporation tax from 19 per cent to 25 per cent looks like a pretty bad mistake right now, when you consider how a firm like AstraZeneca is locating its new plant in Ireland, where corporation tax is half the rate now being levied by the British Government.
“The Treasury looks like it will lose revenue as a result of that decision.”
Mr Hunt told MPs on the select committee that he could not rule out a big hike in fuel duty next year. The Chancellor was asked about his decision to freeze fuel duty at the Budget this year and to keep in place a 5p cut to it for another 12 months.
He was told that the fiscal forecast currently assumes that fuel duty will increase by double digits next year. Harriett Baldwin, the chair of the committee, said she was “very sceptical” that such a move would be made in an election year.
Asked whether he would increase fuel duty next year, Mr Hunt said: “We don’t know is the answer to that. We haven’t made any decisions.”
Asked again whether there could be a double-digit increase to the duty, he said: “That is a decision that we will keep under review, and we will make a decision at the next Budget and it will be decided on the basis of the room we have in our fiscal forecast.”
Mr Hunt said there was still no decision on how much extra Treasury funding would be needed to meet the cost of public sector pay awards.
He insisted there would be no cuts to frontline services but suggested there would be “efficiencies and reprioritisations” within government departments.
At the same time, he indicated that the unexpected surge in inflation since the last spending round meant there would be discussions about what additional support they would need.
“We still don’t know how much it is going to cost because we still haven’t settled all the public sector pay disputes,” said Mr Hunt.
“When we do settle, there will be a negotiation with departments as to how much is borne by additional support from the Treasury and how much is borne by efficiencies and reprioritisations within the departments.
“As with all pay settlements, departments fund pay settlements with the money they receive in a spending review, but in exceptional circumstances there can be a discussion with the Treasury as to any additional help.
“This is a different situation because inflation was so much higher than expected, and therefore the pay settlements have ended up being higher than expected.”
Unions representing NHS staff including nurses and ambulance workers are currently balloting their members on the latest government offer, while disputes are continuing with junior doctors and teachers.
Mr Hunt said there could be “absolutely no room for complacency” on inflation and denied that the Bank of England had overreacted in raising interest rates again this month even though inflation is forecast to fall sharply.
He said: “I don’t believe they are overreacting. I think there is still inflationary pressure in the economy. I am very concerned about it. I think we need to keep our eye on the ball.
“Only a week ago, we found that inflation had actually gone up from 10.1 per cent to 10.4 per cent. I think that demonstrates there can be absolutely no room for complacency.”