New UK Finance Minister Jeremy Hunt put the last elements of Prime Minister Liz Truss’s economic plan in the Westminster shredder on Monday, confirming there would be no tax cuts at all and the government’s energy price guarantee would end in the spring.
In a brief statement to reassure markets that the disastrous mini-budget of his predecessor Kawsi Kwarteng was now consigned to the bin, Hunt said the plan to cut the basic rate of income tax to 19p would be scrapped.
The last round of u-turns were the final humiliation of Truss and her ideological belief that tax cuts would spark growth and lift Britain from the economic doldrums. She now faces an uncertain future with no effective authority after the effective dismantling of her key economic policy.
Overall, the removal of most of the mini-budget measures would raise the Treasury £32bn a year by 2026/27, Hunt said, although in truth the money would have been coming in anyway before the ill-fated mini-budget co-authored by Truss and Kwarteng.
However, it was the decision to truncate Truss’s multi-billion big-ticket plan to shield consumers from soaring energy prices – ironically the one measure that had widespread electoral support – that raised eyebrows. Instead, there would be a review of the plan next April.
“This is a landmark policy supporting millions of people through a difficult winter ad today I want to confirm that the support we are providing between now and April next year will not change,” he said.
“But beyond that, the prime minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices. So I’m announcing today a Treasury-led review into how we support energy bills beyond April next year. ”
He said the plan would be to “design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need”, with any support for businesses targeted to those most affected.
Hunt also warned again of spending cuts and possible tax rises “as we deliver our commitment to get debt falling as a share of the economy over the medium term”.
“All departments will need to redouble their efforts to find savings and some areas of spending will need to be cut,” he said.
Other measures to fall under the knife included cuts to dividend tax rates, a relaxation of tax rules for self-employed people, VAT-free shopping for tourists and alcohol duty changes.
Reporting by Frank Prenesti for Sharecast.com
