Newly appointed chancellor Jeremy Hunt has moved to calm the markets by announcing that almost all the tax cuts outlined in the mini-Budget will be cancelled.
In the aftermath of the announcement, pound sterling increased in value and borrowing costs dropped.
At the time of writing, the pound is trading at $1.13 against the US dollar.
The news will come as a boost to the government, which was looking to calm market volatility in the wake of the mini-Budget, which prime minister Liz Truss conceded had gone “further and faster than markets were expecting”.
When former chancellor Kwasi Kwarteng announced the mini-Budget measures on September 23, the aftermath saw the pound drop to $1.03 against the dollar while the cost of government borrowing soared.
Kwarteng had been due to deliver the government’s fiscal plan on October 31, but Truss dispensed with him on Friday and appointed Hunt as his successor.
Truss also announced last week that the planned cancellation of the corporation tax increase - which would have cost some £18 billion - would not be going ahead, as she sought to calm the markets.
However, after that move did not have the desired effect and government borrowing costs kept climbing, Hunt has now confirmed a series of other U-turns on tax and spending measures.
Out of the measures that were originally announced, cuts to stamp duty and the reversal of the National Insurance rise are all that have survived.
The basic rate of income tax will now remain at 20 pence in each pound “indefinitely until economic circumstances allow for it to be cut”, Hunt said.
Hunt talked up that lower taxes remained a "deeply held Conservative value" but warned that it was "not right" to borrow in order to finance it at the present time.
Further to this, cuts to dividend tax will be cancelled, VAT-free shopping for foreign tourists will not be going ahead, the freeze on alcohol duty rates will no longer continue and changes to off-payroll working reforms will not be implemented.
The Treasury said in a statement that Hunt had “taken these decisions to ensure the UK's economic stability and to provide confidence in the government's commitment to fiscal discipline”.
Hunt himself added that the UK “will always pay its way” and that “confidence and stability” was needed if the economy was to grow.
Another of the major policy reversals sees the government’s Energy Price Guarantee scaled back to just six months, as opposed to two years.
Once the UK has gotten through the winter, Hunt said that the support provided would be reviewed, with a targeted programme put in place for the most vulnerable.
Photo by Chris McAndrew on Wikimedia Commons
