Economy

UK budget U-turns: Hunt scraps almost all tax cuts and limits energy price cap to calm markets

Chancellor of exchequer says £13bn cut to national insurance and £1.5bn in stamp duty changes to remain

Chancellor of the exchequer Jeremy Hunt getting into a car at the rear of Downing Street, London, before he makes an emergency statement to rush forward budget measures that had been due to be announced on October 31st. Photograph: PA

Jim Pickard
Mon Oct 17 2022 - 11:27

Jeremy Hunt, in his first full day as UK chancellor, confirmed that he will scrap most of the tax measures in the disastrous fiscal statement of September 23rd — apart from a £13 billion cut to national insurance and £1.5 billion in stamp duty changes.

Corporation tax will rise from 19 per cent to 25 per cent and a cut to the lower rate of income tax of one percentage point April will be delayed indefinitely.

And the future of the Government’s landmark two-year energy price cap is uncertain beyond next April.

The UK government will reverse plans to cut dividend taxes, make payroll reform, a freeze in alcohol duty and introduce a VAT-free shopping scheme for overseas visitors.

READ MORE

Britain's new Chancellor of the Exchequer Jeremy Hunt has put a halt to almost all the tax measures announced at a mini-budget three weeks ago.

“We will reverse almost all the tax measures that were in the growth plan,” he said on Monday in a televised address. “At a time when markets are rightly demanding a commitment to sustainable finances it is not right to borrow to fund this.”

The overall energy support package was expected to cost as much as £150 billion at a time when the UK’s public finances are in a deeply straitened state.

[ Three Tory MPs break ranks to demand Liz Truss quits ]

The package consisted of a six-month support scheme for businesses costing an estimated £29 billion, as well as a two-year price cap for households which could cost taxpayers another £120 billion.

The household scheme was set to limit yearly gas and electricity bills to £2,500 on average for 28mn households for two years from October 1.

Hunt said there would be a new Treasury review of energy bills from April onwards to cut the price of the scheme and make sure it is more targeted.

“The most important objective for our country right now is stability. Governments cannot eliminate volatility in markets but they can play their part and we will do so,” he said.

[ Truss becomes a zombie prime minister in record time ]

UK government bond prices jumped in early trading on Monday, with the 30-year gilt yield sliding 0.25 percentage points to 4.53 per cent as its price rose. The same yield had ended last week at about 4.7 per cent. — Copyright The Financial Times Limited 2022

LATEST STORIES