Who's in charge of the UK - Truss or Hunt?

By Laura Keunssberg, James Gregory and Ione Wells for the BBC

Jeremy Hunt, British Prime Minister Liz Truss's new Chancellor of the Exchequer, has in a little over 24 hours junked her economic strategy of tax cuts and a promise not to cut public spending.

He has made a virtue out of being candid about how bad things are - dangling the implication the prime minister has not levelled with the public about what comes next.

Whether it's intentional or not, the message isn't that subtle: after the craziness of the last few weeks here comes an experienced grown-up to take control.

And it's given the impression, as one former minister put it: "He's gone out and said he's in charge."

Another said Hunt had "dismantled" the prime minister's agenda, while others suggested his arrival leaves Truss in office, but not really in power.

Difficult decisions will be needed "across the board" on tax and spending, the new chancellor told the BBC.

Speaking in his first interviews since replacing Kwasi Kwarteng, Hunt said some taxes will go up, while government spending may need to fall.

Cutting the top rate of tax and not independently costing measures were mistakes being "put right", he added.

He also insisted he had a "clean slate" after Liz Truss sacked Kwarteng on Friday.

Hunt, a former foreign secretary who had not been part of Truss's cabinet, was made chancellor on Friday as the prime minister sought to restore confidence in her government.

In another dramatic day in Westminster, the PM also scrapped the plan to freeze corporation tax - set out in the 23 September mini-budget - in another major U-turn.

Speaking to the BBC, Hunt signalled a big shift away from the economic policies of Truss and Kwarteng.

"Taxes are not going to come down by as much as people hoped, and some taxes will have to go up," he said. "I'm going to be asking all government departments to find additional efficiency savings."

While he did not say where taxes could rise or public spending be reduced, Hunt did not rule out cuts to NHS spending or rowing back on Truss's pledge to increase defence spending to 3 percent of GDP.

The chancellor, a Rishi Sunak supporter in the leadership contest, said the government needed to "show the world we have a plan that adds up financially".

Truss, prime minister for just 39 days, is already facing pressure from within her party following September's mini-budget, which included £45bn worth of tax cuts and sparked turbulence in the financial markets.

Hunt said Truss's administration had made "mistakes", adding: "It was wrong to cut the top rate of tax for the very highest earners at a time where we're going to have to be asking for sacrifices from everyone to get through a very difficult period."

And he also said it was wrong to "fly blind" and announce the mini-budget without a forecast from the Office for Budget Responsibility (OBR).

He said both of these were now in the process of "being put right".

British conservatives 'discouraged'

Hunt's appointment could calm the markets and has definitely eased some of the concerns in the centre of the Conservative Party, but it has created new unhappiness on the right.

They are frustrated that Truss has given up on her plans and are suspicious that MPs who were never really on board with her ideology have taken advantage of a crisis in the markets for their own political ends.

One of her fellow free marketeers, an ex-minister, told me they were "discouraged" and warned a "full-scale dismantling of the plans would test party unity in a different way".

Meanwhile, Bank of England Governor Andrew Bailey said there had been a "meeting of minds" when he held discussions with Hunt on Friday.

Bailey made the comments after hinting at impending fresh interest rate hikes.

"Inflationary pressures" meant a "stronger response" could be needed from the Bank than previously thought in August, the governor said.

And the Institute for Fiscal Studies warned Hunt had inherited a "difficult and tricky situation", with the public finances "very stretched".

The think tank's director Paul Johnson said: "I think we're going to see even further reversal of tax cuts that we've had, and in addition probably some very tight spending rounds."

'State of despair'

Despite Hunt's appointment, Truss and her premiership remain under significant pressure.

One Tory MP described the party as being in a "state of despair," but Truss supporter Christopher Chope said "time will tell" if she had done enough to secure her position.

Labour leader Sir Keir Starmer accused the prime minister of "grotesque chaos" following the sacking of Kwarteng and called for a general election.

During a speech in Barnsley a day after the upheaval in Westminster, Sir Keir said Truss was "clinging on", arguing that there was "no historical precedent" for the current situation facing her government.

But Hunt rejected suggestions of a general election, saying the country needs "stability".

- BBC