Jeremy Hunt has scrapped almost all of the tax cuts announced in last month’s mini-budget, including postponing a 1p income tax cut “indefinitely” and scrapping a proposed corporate tax cut in a major U-turn for Liz Truss’ government.
He said: “No government can control the markets, but every government can provide assurance on the sustainability of public finances… We will reverse almost all fiscal measures in the growth plan. At a time when markets are rightly demanding a commitment to sustainable finance. It’s not right to borrow to fund this.”
Mr Hunt, who replaced Kwasi Kwarteng as chancellor on Friday, brought forward his financial report by two weeks in a bid to stabilize financial markets. The Treasury said the combined U-turns will save the government around £32billion a year.
- A proposed 1p income tax cut is being postponed “indefinitely”. The Treasury says this will save £6 billion a year.
- Corporate tax will rise to 25 percent from 19 percent in April.
- A planned 1.25 percent dividend tax cut was abandoned. In the mini-budget, Mr. Kwarteng promised to reverse an increase in dividend tax introduced by Rishi Sunak last April. The Government expects to save around £1bn a year by keeping the tax at a higher rate.
- A freeze on alcohol taxes was abolished. Ms Truss had planned to freeze alcohol costs from February next year. The U-turn is worth around £600m a year.
- Changes to IR35 tax rules have been removed.
- VAT-free shopping for tourists has also ended, saving around £2bn a year.
- The energy price guarantee only remains nationwide until April. It will then be targeted and capped, meaning it will only be limited to a few households from then on. Originally it was supposed to be a universal support package with a term of two years.
- The Treasury Department said it would be “irresponsible” for the government to continue “exposing public finances to unlimited volatility in international gas prices”.
- Ministers will launch a review to look at how to help households and businesses with energy bills after April 2023.
- The aim of the review is to “develop a new approach that costs the taxpayer significantly less than planned, while ensuring sufficient support for those in need”.
The mini-budget measures that survive
- A 1.25 percent cut in Social Security from next month was maintained.
- The abolition of health and social security contributions.
- The reduction in stamp duty also remains in place.
https://www.telegraph.co.uk/business/2022/10/18/key-points-jeremy-hunt-statement-mean-economy/ Jeremy Hunt reveals plan to stabilise economy in emergency statement