New British finance minister Jeremy Hunt has reversed nearly all of Prime Minister Liz Truss’s mini-budget that had sparked market turmoil, and reined in a vast energy subsidy plan.
He said that the UK needed to rebuild investor confidence.
Mr Hunt, who was appointed on Friday to fix the public finances after Ms Truss’s economic plan hammered the value of British assets, said the UK needed to generate confidence and stability before it could seek to grow the economy.
He said changes to planned tax cuts would raise £32 billion every year.
UK government spending cuts will also be required to narrow a hole in public finances that the Sunday Times reported was as big as £72 billion.
“I remain extremely confident about the UK’s long term economic prospects as we deliver our mission to go for growth,” the Chancellor of the Exchequer said in a televised clip.
“But growth requires confidence and stability, and the United Kingdom will always pay its way,” he added.
Ms Truss insisted her government’s change of tack “supports and delivers” for people across the country.
In a tweet about an hour after Mr Hunt’s statement, she said: “The British people rightly want stability, which is why we are addressing the serious challenges we face in worsening economic conditions.
“We have taken action to chart a new course for growth that supports and delivers for people across the United Kingdom.”
Sterling extended its gains against the dollar, to be up 1.2% after Mr Hunt’s speech, while government bond prices edged higher.
The near total reversal of the economic plan leaves Ms Truss, Britain’s fourth prime minister in six years, battling to survive in Downing Street less than six weeks after she came to power promising bold tax cuts and deregulation to reignite economic growth.
She has been forced to reverse course after markets reacted violently to her plan, hammering the value of the pound and government bond prices and forcing the Bank of England to intervene to protect pension funds.
The Bank of England stuck to its schedule of ending the support on Friday, adding to the pressure on the new chancellor over the weekend to find ways to reduce spending before the bond markets re-opened.
While he had been expected to reverse some of the tax cuts, the change to the energy support scheme had been unexpected.
Ms Truss had announced a two-year subsidy scheme to support households and businesses through the period of surging energy prices, costing £60 billion in six months.
Mr Hunt said today that the scheme would now run until April, but become more targeted and capped after that.
He would still deliver a fuller medium-term fiscal plan as scheduled on 31 October, alongside forecasts from the independent Office for Budget Responsibility, the Treasury said.
Additional reporting PA
Hunt to reverse almost all mini-budget tax changes
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