13 October 2023

Jeremy Hunt: Key moments and challenges in year as Chancellor

13 October 2023

Chancellor Jeremy Hunt has overseen a dramatic 12 months which has seen households hit by rampant inflation and rising borrowing costs.

In October last year, the long-time frontbencher was thrust into the key position after his predecessor Kwasi Kwarteng resigned from the post.

Since then, Mr Hunt has faced pressure and scrutiny from virtually every angle.

He has faced challenges ranging from volatility in the mortgage market to accusations of supermarkets profiteering, as food became sharply more expensive.

Here the PA news agency looks at the defining moments and hot topics for the Chancellor over the past year:

– Arrival after Kwasi Kwarteng

The most dramatic period of Mr Hunt’s first year as Chancellor was potentially the moment he was thrust into the role.

Mr Kwarteng resigned after less than six weeks amid the fall-out of his “mini-budget” with then prime minister Liz Truss.

Mr Kwarteng scrapped part of the financial plan himself, which included significant tax cuts and spending pledges, after the pound plunged to a record low against the dollar and mortgage rates spiked.

However, it was not enough to save his job.

Mr Hunt took the job on October 14 and made even more U-turns on the disastrous mini-budget days later, in order to win back favour with the financial markets.

On October 17 Mr Hunt made an emergency statement in which he ripped up tax-cutting plans to shed billions off the UK Government’s debt book.

This included scrapping a planned 1p cut to the basic rate of income tax, 1.25 percentage point cut in dividend tax, and axing a new VAT-free shopping scheme for overseas tourists.

Shares in London listed firms jolted higher as investors and traders welcomed the proposals.

Days later, Liz Truss confirmed she would resign as prime minister after just 44 days in office.

– First budget

The Government had been due to deliver a budget on Halloween last year, but the swift appointment of Rishi Sunak as Prime Minister saw this pushed back into November.

A month after his emergency statement, Mr Hunt set out a package of about £30 billion of spending cuts and £24 billion in tax rises over the next five years, in stark contrast to the plans under his predecessor.

The autumn statement was designed to lead to a “shallower downturn” in the UK’s finances.

Measures included reducing the threshold at which the 45p top rate of income tax is paid, from £150,000 to £125,140.

He also announced the windfall tax on oil and gas giants would increase from 25% to 35% and proposed a 45% levy on electricity generators to help raise an estimated £14 billion.

A core part of the budget also saw energy support for households increase, although it was for a much shorter period than previously indicated.

– Energy crisis

The decision to help households through last winter had already been taken when Mr Hunt came into office. But, trying to reassure markets, one of the first things in his in-tray was to reduce the generosity of the support.

Just two days after Liz Truss became prime minister the Government said it would pay the difference, so that households would pay no more than 34p per unit of electricity and 10.3p for gas.

That meant that the average household would pay about £2,500 per year for two years from October 1, 2022.

When Mr Hunt took charge he kept that same support in place for the winter, but would limit it to just six months. He promised to review the situation ahead of the support ending in April.

Just a month later, with a new prime minister in place, Mr Hunt said that the support would continue for another year after April, but would be made less generous. The average bill would now be about £3,000 from April 2023, he said.

But a few months later, in the March budget, as wholesale energy prices remained high, but were falling from their peaks, Mr Hunt extended the £2,500 guarantee for another three months.

– Public sector pay

The rising cost of living also put pressure on the Government in relation to wages, with workers wanting these to keep pace with inflation.

As a result, the Treasury was involved in months of intense conversations over the latest pay deal for public sector workers after lengthy strikes in many key areas.

Doctors and teachers were among striking public sector workers as unions sought to put pressure on Government to secure a better deal.

In July, public sector workers were ultimately offered a deal worth at least a 6% increase following recommendations by independent pay review bodies.

However, the Treasury ordered a range of measures for Whitehall departments to “reprioritise” their budgets in order to help secure funds.

– Banking challenges

The Chancellor met major banks earlier this year and agreed to a “mortgage charter” to support mortgage holders coming under pressure from higher borrowing costs, after the average two-year fixed-rate mortgage surpassed 6%.

Among a number of measures, borrowers were given the chance to switch to an interest-only mortgage for six months or extend their mortgage term to reduce monthly payments for the same period.

The charter was designed to provide some temporary relief for struggling borrowers while avoiding offering major cash support which could further fuel inflation.

Separately, Mr Hunt stepped in to ask the City watchdog to urgently investigate the scale of de-banking, after former Ukip leader Nigel Farage sparked a debate over whether UK banks were shutting down people’s bank accounts over their political beliefs.

This month the Chancellor pledged to change the law to prevent people being de-banked for having the “wrong political views”.

Meanwhile, in March, the Government and the Bank of England stepped in to facilitate a rescue deal of the UK arm of collapsed US lender Silicon Valley Bank, which was bought by HSBC.

Mr Hunt said the move was part of a promise to look after the nation’s technology sector.

– Inflation

The cost-of-living crisis has gripped households over the past year, with rocketing food prices and record energy bills.

The overall rate of inflation peaked at 11.1% in October last year, according to the Office for National Statistics (ONS), but the cost of food continued to soar well into 2023.

Food and drink inflation peaked at 15.7% in April, according to the British Retail Consortium, with fresh food prices up 17.8%.

The surge in prices stemmed from higher production costs and pressure on commodity prices stoked by the Russian invasion of Ukraine.

In June, Bank of England governor Andrew Bailey suggested some retailers could be boosting their profits through higher pricing.

Shortly after, Mr Hunt said he and other ministers were talking to grocery chains and suppliers about these price hikes, calling on supermarkets to act “responsibly and fairly” as commodity prices cooled.

At the end of the month, the Chancellor met the UK’s regulators to raise concerns that businesses are not passing on easing cost pressures to consumers fast enough.

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