UK withdraws tax cuts, scales back energy aid to calm markets

Britain’s new Finance Minister Jeremy Hunt has backed off tax cuts promised by his predecessor and scaled back support for a home energy bill in an attempt to restore financial stability after weeks of market turmoil.

Hunt was brought in last Friday to boost the financial credibility of the UK government after former Prime Minister Kwasi Kwarten’s ‘mini-budget’ included an underfunded £45bn ($50bn) tax cut. I was. Rising borrowing costs.

In a televised statement on Monday, Hunt overthrew nearly all of the economic plans Mr. Kwarten laid out some three weeks ago with the enthusiastic backing of Prime Minister Liz Truss.

Mr Hunt said: But it would not be right to borrow to fund this tax cut at a time when markets rightly demand a commitment to sustainable finances. “

Epoch Times photo
Prime Minister Liz Truss during a press conference at the Briefing Room in Downing Street, London, 14 October 2022. (Daniel Leal/PA Media)

big tax reverse

The negative reaction in financial markets forced the truss to make a series of U-turns. This includes cutting the top tax rate by 45% and scrapping plans for a corporate tax freeze.

Hunt is now moving to scrap many of the remaining tax plans in the mini-budget. He said the basic tax rate he had abandoned plans to reduce by one pence and would remain at 20 pence per pound until the country could afford to reduce it.

Dividend tax cuts promised by his predecessor will also come into effect, along with VAT-free shopping for foreign tourists, alcohol tax freezes and relaxation of IR35 rules for the self-employed.

Hunt said the tax measures alone would bring in £32bn ($36bn) after economists estimated the government was facing a £60bn ($68bn) black hole in finances.

less energy help

The new prime minister also scaled back the energy price support the government had promised to households and businesses.

He said the energy price guarantee (which was based on a two-year price cap) will end in April, after which the government will consider targeting aid to those most in need.

Hunt called the Energy Price Guarantee “a groundbreaking policy that will help millions of people survive the harsh winter.”

He confirmed that the pledged aid would be guaranteed until April, but “there would be no responsibility to keep the public finances exposed to endless fluctuations in international gas prices”.

The Treasury Department will lead a review of how it will support the post-April energy bill, “while ensuring adequate support for those in need, while significantly lowering costs for taxpayers than planned.” design a new approach.

“Any support to businesses will target those most affected, and new approaches will promote greater energy efficiency.”

“Humiliation Climb Down”

About an hour after Hunt’s remarks, the prime minister wrote on Twitter:

“We have taken action to plan a new course for growth that will support and serve people across the UK.”

When asked about the credibility issues Truss currently faces, her official spokesperson claimed she offers “leadership stability.”

A spokesperson said: “The prime minister listens to the voice of the people. She listens to market advice, listens to the views of her colleagues, provides economic stability and provides important leadership stability in practice. We are making the difficult decisions necessary to change our approach so that we can stay on track.”

But the main opposition Labor party said the Conservatives had “lost all credibility”.

Labour’s shadow prime minister, Rachel Reeves, said the Tories could not provide the “confidence and stability” needed for growth.

She said, “The humiliating cuts in their energy plans are again begging the question. Why don’t they bring in windfall taxes to help pay bills to energy producers?”

PA Media contributed to this report.

Alexander Chan