Jeremy Hunt has ripped up almost all of Liz Truss’s disastrous mini-budget, scrapping virtually all of the announced tax cuts and drastically scaling back the government’s flagship plan to cap rising energy prices.
In what amounts to utter humiliation for the prime minister, who now seems stripped of any political authority, the new chancellor said the only remaining tax cuts would be those already being put into place – the move to reverse the recent rise in national insurance and a cut to stamp duty.
In a televised briefing before a full Commons statement on Monday afternoon, Hunt, who was appointed on Friday in place of the sacked Kwasi Kwarteng, said the plan to cut the basic rate of income tax by 1p to 19p in April, a significant part of the mini-budget, would be frozen indefinitely.
Ahead of the statement, Keir Starmer used an urgent question granted to Labour on the economic situation to mock Truss for not turning up the Commons to answer it, sending Penny Mordaunt, the leader of the Commons, in her place.
Truss had been “detained on urgent business”, Mordaunt told the Commons, to laughter from opposition MPs. Starmer responded by saying Truss “had no mandate from her party and no mandate from the country.” On the PM’s absence, Starmer joked: “The lady’s not for turning – up.”
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Introducing the budgetary U-turn in his statement, Hunt argued that he wanted to cut taxes, adding: “But at a time when markets are rightly demanding commitment to sustainable public finances, it is not right to borrow to fund this tax cut.”
The other tax cuts announced by Kwarteng, to dividend taxes, off-payroll working changes, a VAT-free shopping scheme and a freeze on some alcohol duties, would be scrapped, he said.
Hunt said the tax changes, intended to bring “confidence and stability”, would save about £32bn a year.
Even more significantly, in an attempt to claw back spending and boost revenue, the chancellor also announced that the government’s scheme to cap energy prices for two years, costing about £80bn, would be universal only up to April, being targeted after that at poorer households.
“This is a landmark policy supporting millions of people through a difficult winter, and today I want to confirm that the support we are providing between now and April next year will not change,” he said.
“But beyond that, the prime minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.”
Truss’s spokesperson said on Monday she would not resign, saying the prime minister remained committed to restoring stability to the economy and driving growth.
In an attempt to shore up support among the more moderate wing of the Conservative party, Truss will address the One Nation caucus at 6pm before holding a reception for cabinet ministers in No 10 at 7.30pm.
At a private meeting with Tory MPs before his Commons statement, those present told the Guardian that Hunt urged colleagues to give Truss credit for reneging on her suite of tax cuts to try to soothe the markets.
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Rachel Reeves, the shadow chancellor, said the Conservatives had “lost all credibility”. She added: “The chancellor said growth requires ‘confidence and stability’ yet it’s clear that the Tories can’t provide this. We are still flying blind with no [Office for Budget Responsibility] forecasts and no clarity of the impact of their mistakes.”
Ed Davey, the Liberal Democrat leader, said Truss’s government had “trashed the British economy and put hundreds of pounds on people’s mortgages”. He added: “That is why we need a general election, to take them out of power and end this crisis.”
With the new chancellor apparently in complete charge, Truss’s future in No 10 seems extremely perilous, with anguished Conservative MPs openly discussing whether and how she could be replaced.
Shortly after his statement, a fourth Tory MP called publicly for Truss to step down. Angela Richardson, the MP for Guildford since 2019, told Times Radio: “I just don’t think that it is tenable that she can stay in her position any longer. And I am very sad to have to say that.”
Under Conservative party rules, a leader cannot be formally challenged in their first year in the job. However, this can be changed by the 1922 Committee, which represents Tory backbenchers.
The new package of tax measures was to have been announced on 31 October, when Kwarteng, and then Hunt, were scheduled to set out the government’s formal growth plan, along with held-back forecasts from the Office for Budget Responsibility (OBR).
This date was an advance on Kwarteng’s original date of 23 November – but with currency and bond markets in turmoil, it was decided that the key tax and spending changes would be announced as soon as possible.
The pound strengthened and UK government bonds rallied further after Hunt’s statement.