Chancellor of the Exchequer Jeremy Hunt scrapped plans to cut taxes and signaled consumers would shoulder more of the increase in energy prices from next April as he set out a package of measures to get a grip on the public finances.
Hunt said income tax cuts the government had planned would be shelved indefinitely, and he reversed plans to slash dividend tax rates and scrap alcohol duties.
The measures reverse more of Prime Minister Liz Truss’s growth program, which prompted a selloff in UK assets after it was unveiled by her then-chancellor Kwasi Kwarteng. Truss fired Kwarteng on Friday and named Hunt after investors dumped the pound and UK government bonds.
Including Kwarteng’s earlier decision to reverse a £2 billion income tax giveaway to top earners, the mini-budget u-turn totals £32 billion. However, that may not be enough as the official estimate of the black hole in the public finances is believed around £70 billion.
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Hunt will give further details to the House of Commons at 3:30 p.m. in London on Monday. He also intends to deliver a full fiscal plan on Oct. 31.
{{/usCountry}}Hunt will give further details to the House of Commons at 3:30 p.m. in London on Monday. He also intends to deliver a full fiscal plan on Oct. 31.
{{/usCountry}}Since taking over the Treasury three days ago, he has been outlining a radically different fiscal approach from Truss, saying taxes would have to rise and spending would have to be cut. That was part of a bid to prevent further punishing increases in UK government borrowing costs, but they go against pledges made by Truss during the Conservative Party leadership campaign.
Truss has already been forced into a series of U-turns since investors dumped the pound and gilts after her call for £45 billion ($50 billion) in unfunded tax cuts. She fired Kwarteng and shelved plans to freeze corporate tax and lower the top rate of tax.
Bloomberg Economics calculates there is a budget hole ranging from £28 billion to £50 billion to fill, depending on the pace of debt falling.