Chancellor Jeremy Hunt further unwinds government mini-budget
Leeann Nash October 17th 2022 - 2 minute read
Jeremy Hunt, the newly appointed Chancellor of the Exchequer, has reversed ‘almost all’ of the tax cuts unveiled in the disastrous mini-budget just three weeks ago.
Since entering Number 11 on Friday, Hunt wasted no time in scrapping his predecessor’s bundle of unfunded tax cuts, which had sent UK markets into meltdown and put the UK financial markets on incredibly unstable footing.
The tax cuts announced in the mini-budget that Hunt has now reversed include:
- the cut to the basic rate of income tax;
- cuts to dividend tax rates;
- the scrapping of IR35 tax reforms;
- the VAT-free shopping scheme for non-UK tourists;
- and the freeze on alcohol duty rates.
Only the measures that have already begun the parliamentary legislative process – such as scrapping the rise in National Insurance and the cut to stamp duty – will be kept.
Hunt also announced that the government will review the energy price guarantee – Liz Truss’s flagship policy.
Under Truss’s original plans, the energy-bill scheme would continue indefinitely for two years. However, the government had come under fire for writing a ‘blank cheque’ and for not targeting the support to help those most in need.
Now, the policy in its current form will end in April. After then, the government will reassess the situation and aim to provide more targeted (and less costly) support.
Hunt’s overhaul went further than markets had anticipated, and investors reacted positively to the return of economic orthodoxy and fiscal responsibility. UK stock, bond and currency markets rallied.
However, more volatility may lie ahead. Truss’s policy platform has been dismantled and her authority is in tatters, with many commentators believing the beleaguered PM is on borrowed time.
UK markets may remain cautious amid the uncertainty, with any upbeat mood limited by concerns about what comes next.
The Conservative Party’s next steps will be crucial for both the survival of the government and the country’s economic landscape. If the Tories can move forward quickly, decisively and as one, then optimism may return. But if the ruling political party remains divided and instability continues, there may be more turbulence in UK markets.