Jeremy Hunt scraps Liz Truss’s “mini-budget” economic agenda

In a video statement made on Monday, Chancellor of the Exchequer Jeremy Hunt announced the mammoth U-turn in a bid to “give certainty” about public finances and calm markets.

The move will be seen as a huge blow to Truss’s hold on power, which was already under pressure after assuming the role with a minority of support from Tory MPs and was only weakened by the reaction to the controversial tax measures.

Truss had already dumped plans to abolish the nation’s top tax bracket in a major break for the richest Britons, and on Friday scrapped her plan to cut corporation tax.

The scrapped plan to remove the 45 per cent rate for those earning more than £150,000 ($271,000) — putting everyone earning more than £50,000 on the same 40 per cent rate — would have cost about £2 billion.

It was a small part of Truss and Kwarteng’s unfunded plan to deliver £45 billion ($81.3 billion) in tax cuts, which sent the pound to record lows — losing 7p against the US dollar in a matter of days — and forced the Bank of England to take emergency action.

But “tax cuts for the rich” focused public anger during a cost of living crisis leaving poorer citizens wondering how they would pay for heating over winter.

The proposal was scrapped in the middle of the Conservative Party’s annual conference but was not enough to calm markets, and led to the further retreats and Kwarteng’s eventual sacking and replacement with Hunt.

Hunt’s move to ditch “almost all” of the tax measures announced in the government’s “mini-budget” last month includes ditching changes to payroll tax, a VAT-free (Value Added Tax) shopping scheme for international visitors, and a freeze on alcohol duty rates.

He said the health and social care levy would still be abolished and stamp duty changes would still go ahead.

Hunt said the energy price guarantee, introduced in the face of spiralling energy costs provoked by Russia’s war on Ukraine, would only last until April, after which he government would search for a cheaper option.

“A central responsibility for any government is to do what’s necessary for economic stability,” Hunt said.

“This is vital for businesses making long term investment decisions, for families concerned about their jobs, their mortgages and the cost of living,” he said.

“No government can control markets but every government can give certainty about the sustainability of public finances and that is one of the many factors that influence how markets behave.”

In addition to scrapping the cuts, Hunt said all government departments would need to “redouble” efforts to find savings, saying “some areas of spending will need to be cut”. 

“It is a deeply held Conservative value — a value that I share — that people should keep more of the money that they earn,” Hunt said.

“But at a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut.”

Truss had earlier refused to reveal where money for the tax cuts would come from but in Parliament insisted she would “absolutely” stick to her leadership campaign promise not to cut services.

U-turn dubbed a ‘complete humiliation’

Labour Shadow Chief Secretary to the Treasury Pat McFadden said the move was a “complete humiliation” for Truss.

“The platform upon which she fought and won the conservative leadership election has caused economic chaos for three weeks, repeated interventions on behalf of the Bank of England, and driven up mortgage rates,” he told the BBC.

“The damage has now been done. She’s in an impossible position where the survival of the government is dependent on publicly torching everything that she believes.

“So today is a humiliation for her. It’s a humiliation for the government and the fear must be that the damage has been done and will leave the country paying a continued Tory instability premium and people paying a Tory premium on their mortgages for some time to come.”

Backbencher Crispin Blunt on Sunday became the first Tory MP to publicly call for Truss to resign and maintained his criticism on Monday.

“If your confidence levels as a prime minister are in single figures, the position is frankly irretrievable,” he told the BBC.

“And we don’t have time, between now, over the next few years to waste in seeing if we can repair Liz as our prime minister and as our party leader so that she could command the confidence of the public.

“We need to make a change.”

Many Tories insist changing leaders again, so soon after a change in chancellor and just a few weeks after Truss took office, would not provide the stability the nation needed.

Boris Johnson supporter Nadine Dorries even suggested the party had only three options: back Truss, bring back Johnson, or call a general election.

Truss took Tory leadership on back of tax cuts promise

The tax cuts were the central plank of Truss’s campaign to replace Johnson as the nation’s leader after he resigned in the face of a series of scandals.

A majority of MPs voted for former chancellor Rishi Sunak to lead the party but after a summer (southern hemisphere winter) on the hustings, Truss won a ballot of some 170,000 Conservative Party members.

The pound and London’s FTSE 100 rose very slightly following Hunt’s announcement.

The government’s full “Medium-Term Fiscal Plan” will be released on October 31.

– Reported with Associated Press