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New Chancellor Jeremy Hunt has issued an emergency statement as he seeks to restore stability following weeks of turmoil on the financial markets.
Hunt confirmed he is ditching many of the measures in the mini-budget, including the planned cut to income tax.
In an emergency statement, he said: ‘We will reverse almost all the tax measures announced in the growth plan three weeks ago that have not started parliamentary legislation.
‘So whilst we will continue with the abolition of the health and social care levy and stamp duty changes, we will no longer be proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms introduced in 2017 and 2021, the new VAT-free shopping scheme for non-UK visitors or the freeze on alcohol duty rates.’
Hunt said his tax cut reversals will raise some £32 billion a year as part of efforts to get the public finances back on track.
In an emergency statement, he said: ‘The measures I've announced today will raise every year around £32 billion.’
The basic rate of income tax will remain at 20p indefinitely, Hunt said.
The rate had been due to reduce to 19p from April under Kwasi Kwarteng's mini-budget, a year earlier than Rishi Sunak had planned.
But Hunt said it would now stay at 20p until economic conditions allowed a reduction.
He said: ‘It is a deeply held Conservative value a value that I share that people should keep more of the money that they earn.
‘But at a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut.’
The government will continue with its planned cut to stamp duty and its reversal of the 1.25 percentage point increase in national insurance contributions, the chancellor said.
Hunt announced that help with energy bills for households will only last until April, with a review to find a ‘new approach’ that will ‘cost the taxpayer significantly less’.
In an emergency statement, the new chancellor said: ‘The biggest single expense in the growth plan was the energy price guarantee.
‘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.
‘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.
‘So I'm announcing today a Treasury-led review into how we support energy bills beyond April next year. The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.
‘Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency.’
The chancellor said he remained ‘extremely confident’ about the country's long-term economic prospects, but added: ‘Growth requires confidence and stability and the UK will always pay its way.
‘This government will therefore take whatever tough decisions are necessary to do so.’
Government spending in ‘some areas’ will be cut, the chancellor confirmed.
Hunt said: ‘There will be more difficult decisions, I'm afraid, on both tax and spending as we deliver our commitment to get debt falling as a share of the economy over the medium term.
‘All departments will need to redouble their efforts to find savings and some areas of spending will need to be cut.
‘But as I promised at the weekend, our priority in making the difficult decisions that lie ahead will always be the most vulnerable and I remain extremely confident about the UK's long-term economic prospects as we deliver our mission to go for growth.’
The pound strengthened and UK government bonds rallied further as Hunt announced plans to reverse key policies in former chancellor Kwasi Kwarteng's mini budget.
Sterling rebounded by more than 1.2% to 1.139 against the US dollar shortly after Hunt gave his emergency statement to calm the financial markets.
Yields on 30-year government bonds, or gilts, eased back further by around 10%, as the new chancellor set out plans to shave off billions of government debt.
The interest on long-dated bonds hit a low of around 4.32% shortly after the first announcement.
source: PA
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