Prime minister Liz Truss sacked Kwasi Kwarteng on Friday and appointed Jeremy Hunt as chancellor instead. The switch came after Kwarteng’s 23rd September mini-budget statement – implementing measures for which Truss had stood in her leadership campaign – caused the exact economic turmoil that her rival Rishi Sunak had predicted.
Today, Jeremey Hunt has formally put the Truss/Kwarteng growth plan in the shredder.
Out go cuts to income, corporation and dividends taxes. The freeze on alcohol duty rates is scrapped. Vat-free shopping for foreign visitors is not now being introduced. And the IR35 off-payroll working rules for freelancers are not now being abolished, as promised by Kwarteng and Truss.
The U-turn on scrapping the 45p rate of income tax on top earners had already been announced by Kwarteng on 2nd October, but that was not enough to save his career.
Taken together, these changes are estimated to be worth around £32bn a year, Hunt said.
All that remain of the tax reforms announced by Kwarteng on 23rd September are the stamp duty cuts and the reversal of the previously planned National Insurance increase.
In another massive policy U-turn, the energy price cap has been limited for just six months. The Treasury is now reviewing how it can protect struggling bill-payers beyond April 2023 without borrowing as much as Truss/Kwarteng had planned. Hunt said that the objective of the review was to design a new approach that will cost the taxpayer significantly less than planned while ensuring enough support for those in need. He also said that any support for businesses will be targeted to those most affected, and that the new approach would better incentivise energy efficiency.
He also said that there was a new round of public spending cuts, which is likely to include a slowing down of infrastructure spending. However, the flagship HS2 project is considered safe. Hunt, now considered to be de facto prime minister given that Truss has lost all credibility, has been a consistently strong support of the project. “HS2 is absolutely vital. Post Brexit we must be ambitious for our country and hungry for our economy. What signal would it send if we cancelled our highest profile infrastructure project and weakened our commitment to share prosperity around the country?”
In 2020 he said: “No HS2 equals no ambition for our country just when the whole world is looking at us.”
Any U-turn from him on this position would leave him with as little credibility as Liz Truss.
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