Jeremy Hunt Announces Reversal Of "Almost All Tax Measures" From Mini-Budget
Chancellor Jeremy Hunt has rolled back "almost all tax measures" in the "mini-Budget" with an emergency intervention in an attempt to restore the government's economic credibility.
The Chancellor also said the planned cut to income tax would also be paused "indefinitely".
Hunt said the reversal of almost the entire mini-budget would raise £32bn with cuts to dividend tax rates scrapped and the freeze on alcohol duty rates ended.
It means only the cuts to stamp duty and the scrapping of the National Insurance rise would remain because they were already working their way through the legislation.
Hunt said he was announcing the plans early to "reduce unhelpful speculation", adding: "No government can control markets but every government can give certainty about the sustainability of public finances."
In a further major reversal to the government's plans, Hunt announced he was ending the universal energy price cap support in April, with future support being offered on a targeted basis following a Treasury review to decide how households will be support going forward.
He said he had made the decision because it would be "irresponsible for the government to continue exposing the public finances to unlimited volatility in internation gas prices".
Announcing almost the entire scrapping of Truss's economic policy plans, he said: "We will reverse almost all the tax measures announced in the growth plan three weeks ago that have not started parliamentary legislation.
"Whilst we will continue with the abolition of the health and social care levy and the stamp duty changes, we will no longer be proceeding with the cuts to dividend tax rates, the reversal of off payroll working reforms...the new VAT free shopping scheme for non-UK visitors or the freeze on alcohol duty rates," he said.
He also suggested there could be further measures, including cuts to public spending, despite a pledge by Truss to the contrary less than a week ago.
"There will be more difficult decisions on both tax and spending," he said. "All departments will need to re-double their efforts to find savings, and some areas of spending will need to be cut."
Hunt confirmed early Monday morning that he would bring an announcement on how it will fund some measures from the "mini-Budget" in a bid to steady market jitters, with a full medium-term fiscal announcement still scheduled for 31 October.
Hunt met with Truss at Chequers over the weekend and held further meetings with the governor of the Bank of England on Sunday night.
The Chancellor is expected to set out the details in full during a Commons statement at 3:30pm on Monday, with the Treasury saying he would "bring forward measures from the medium-term fiscal plan that will support fiscal sustainability".
Responding to the u-turn, shadow chancellor Rachel Reeves said the Conservatives had "lost all credibility".
“The Chancellor said that growth requires ‘confidence and stability’ yet it’s clear that the Tories can’t provide this. There will continue to be a huge cost to families because of the actions of this Tory government," she said.
“We are still flying blind with no OBR forecasts and no clarity of the impact of their mistakes.
“The humiliating climb-down on their energy plan begs the question yet again – why won’t they bring in a windfall tax on energy producers to help foot the bill?"
The government has already been forced to u-turn on their plans to remove the top 45p rate of income tax and overhaul corporation tax, but the moves have failed to steady markets.
Market reactions have been cautiously optimistic since Hunt signalled there would be further alterations to the government's fiscal strategy, with the value of the pound increasing and prices on government bonds improving since markets opened on Monday.
The emergency intervention comes after markets shifted in the wrong direction on Friday following Truss's decision to sack Kwasi Kwarteng as chancellor and ditch their plans to scrap an increase in corporation tax.
Conservative MPs will be looking toward market moves in the wake of the Chancellor's more detailed statement this afternoon, with further pressure likely if the markets respond poorly to the announcements.
Four Conservative MPs have already publicly called for Truss to step down, with Reigate MP Crispin Blunt saying the "game is up and it's now a question as to how the succession is managed".
Senior Conservative MP Mel Stride, who chairs the Commons Treasury Committee, said the decision to intervene was a "strong start" from Hunt, after saying last week there was a need for a "fundamental restart".
"Surprising markets positively on the upside with an early statement to the House of Commons today is a wide move.
"Message is 'we get what needs to be done and it's being sorted'."
But shadow Treasury chief secretary Pat McFadden said the emergency statement proved "ministers are now terrified of market reaction".
Speaking to the BBC, he said: "It's a testament to how much chaos has been caused by Liz Truss since she became prime minister.
"I think it is evidence of the panic that the government is in and the damage that has been caused over the last few weeks."
Torsten Bell, chief executive of the Resolution Foundation think tank said the decision to bring forward the announcement was an attempt to lower government debt, and improve the financail situation ahead of the release of independent forecasts at the end of the month.
"It's not just about bringing forward some tax/spend announcements from 31 October - it's trying to reduce how many he has to announce full stop," he said.
"The Office for Budget Responsibility won't have finalised their interest rate assumptions underpinning their government debt interest forecast.
"So pre-announcing tough choices is about hoping that markets reduce rates on government debt [leaving] a smaller fiscal holse to fill on 31 October."
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