Turmoil has abated for the moment as newly-dubbed Chancellor Jeremy Hunt moved fast to ditch nearly all of his predecessor’s disastrous and not-so-diminutive “mini-Budget”, hopefully bringing an end to the financial market freak show of the past few weeks.

Whatever your view of the Tories, this has been the most un-conservative spell of economic management by the party in living memory and beyond. With none of the usual independent analysis from the UK’s Office for Budget Responsibility, former chancellor Kwasi Kwarteng’s fiscal statement on September 23 promised billions in tax cuts with no way to pay for them and was emphatically tin-eared to the principles of sound financial management which Conservatives believe to be their sole preserve.

In the ensuing chaos, it became clear there was no option but to hit the reset button. After spending more than £19 billion in recent weeks to avoid a collapse in UK bonds – which the government uses to borrow money – the Bank of England confirmed yesterday morning its reluctance to make any further purchases, effectively leaving Mr Hunt on his own to deal with the market tumult.

The Chancellor countered with an emergency statement in which he scrapped nearly all of the tax cuts put forward on September 23 and scaled back dramatically on government support for household energy bills, which was to have continued for the next two years but will now end in April. Beyond that, assistance will be capped and targeted towards the most vulnerable as it would “not be responsible to continue exposing public finances to unlimited volatility”.

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“So I am today announcing a Treasury-led review into how we support energy bills beyond April next year,” Mr Hunt said. “The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.

“Any support for businesses will be targeted to those most affected, and the new approach will better incentivise energy efficiency.”

His mantra is that of stability and to this investors responded, with an initial rise in the value of the pound and decline in UK bond yields indicating markets are happy to give the new Chancellor time and space to put the Government’s house back in order. However, there remain formidable obstacles and painful decisions to come.

The moves announced yesterday by Mr Hunt will help cover about £32bn of the black hole in government finances, but economist Thomas Pugh at RSM reckons the Chancellor will need to find a further £20bn just to get debt stabilised relative to gross domestic product: “It would take more like £40bn to put it on the same trajectory as we predicted before the mini-Budget was published in September,” he added.

So while financial markets have been given some of the clarity they crave, certainty for those living in the real economy has further diminished. A succession of policy U-turns has merged into a rollercoaster that has left consumers and businesses across the UK dizzily wondering what’s in store during the coming months.

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Pensioners on fixed incomes hope to discover tomorrow whether the Government will stick to its pledge – which it recommitted to as recently as Thursday – to raise the state pension in line with inflation. This comes after the so-called “triple lock” was suspended last year to account for anomalies created by the furlough programme during the pandemic.

It also remains to be seen whether calls for an uplift to means-tested benefits will be heeded following yesterday’s assertion by Mr Hunt that the “priority in making the difficult decisions that lie ahead will always be the most vulnerable”.

The biggest question mark is how the Government will reform the energy price cap, which nearly all have agreed should focus on those most in need. But with estimates that as many as three-quarters of UK households would have fallen into fuel poverty had the price cap not come into effect, setting up a system that correctly targets those in difficulty will be extremely challenging.

Defined as those who spend 10% or more of their disposable income on heating and electricity bills, fuel poverty eats into consumer demand as people have less to spend after paying for the essentials. This would further hamper growth in a UK economy that is already believed to be in recession.

Rising energy costs are also consistently cited as the biggest concern among business owners, with some firms saying they plan to close during the winter because they can’t afford to keep operating.

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The two further options available to Mr Hunt are to either cut spending or raise taxes. It is questionable how much could be eked out of day-to-day spending after the heavy hit to public budgets during the years of austerity, so a reduction in capital spending seems more likely.

There are relatively few losers when it comes to cutting public investment, which makes it politically attractive. However, the UK already suffers from low levels of investment which in turn has been a major barrier to long-term growth.

On the taxation front, it seems a revenue cap on renewable energy producers is all but a done deal. This could raise tens of billions of pounds and would function as a natural hedge against the Government’s energy price guarantee, but renewables operators say it will discourage future investment in the transition to net-zero.

A further possibility on taxation would be to increase the rate of VAT, but this again would hamper consumer demand and deepen the difficulties faced by the retail, leisure and hospitality industries.

Yesterday’s move by Mr Hunt was a step in the right direction towards repairing Britain’s mangled reputation among international investors, but there is some way yet to go in restoring full credibility. Thus has the UK unfortunately joined the ranks of those – think here of Italy or Greece before it – where leaders must placate external interests in ways that might not necessarily align with the good of the broader electorate.