Jeremy Hunt reports: New UK finance minister scraps tax plan, intervenes in energy support

  • Hunting in a broad energy support program
  • Hunt reverses all of Dress’s tax cuts
  • The announcement came two weeks ahead of schedule
  • Sterling rises against the dollar
  • Bond prices rose in early London trade

LONDON, Oct 17 (Reuters) – New Chancellor of the Exchequer Jeremy Hunt sought to rebuild investor confidence in Britain on Monday, reversing all of Prime Minister Liz Truss’s mini-budgets that sparked market jitters and reining in a vast energy subsidy program.

Hunt, tasked with stemming a bond market rout that has been on edge since the government announced unfunded major tax cuts on Sept. 23, said the country must now raise taxes and cut spending to rebuild stability and confidence.

The former health and foreign affairs minister has now reversed almost every plan that helped Truss win the leadership of the ruling Conservative Party a month ago, leaving the prime minister fighting for her future.

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A two-year energy support scheme for homes and businesses, expected to cost more than £100bn, will now end in April and will be replaced by a more targeted scheme that will “cost taxpayers significantly less than planned”.

After the report, the pound rose 1.4% to a session high of $1.1332. That was less than 1% of where it was just before the announcement.

British government bonds rallied aggressively on Hunt’s report, posting one of their biggest daily price gains since records began.

“We will reverse all the tax measures that were announced in the development plan three weeks before Parliament started legislation,” Hunt said.

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He said changes to the planned tax cuts would raise 32 billion pounds ($36 billion) each year.

“I am very optimistic about the UK’s long-term economic prospects as we deliver on our mission to drive growth,” Hunt said in a television clip. “But growth requires confidence and stability, and the UK will always pay its way.”

Total reversal

Markets reacted violently to Truss’s plan, hammering the pound and the price of government bonds, forcing the Bank of England to intervene to protect pension funds, forcing the government to overturn.

Adding to the pressure, the bank stuck to its schedule to end support on Friday.

He said government spending cuts would be needed to plug a hole in public finances that the Sunday Times reported was as large as 72 billion pounds ($81 billion).

A total reversal of the economic plan leaves the Truce struggling to maintain credibility. His turnaround angered lawmakers who supported him, and further emboldened his opponents to try to find a way to oust him from power.

The fourth British prime minister in six years, he had previously only been appointed to the post on September 6.

A handful of lawmakers have already called for him to go. Opposition Labor finance spokeswoman Rachel Reeves said a Conservative government could not provide stability.

“The Conservatives have lost all credibility,” he said.

The change to the energy support program comes as Hunt is expected to reverse some of the tax cuts.

The Truss announced a two-year subsidy scheme to support homes and businesses amid rising energy prices, costing £60bn in just six months. Hunt said Monday that the program will now run through April, but will become more targeted after that.

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A new finance minister, along with forecasts from the Independent Office for Budget Responsibility, Oct.

($1 = 0.8887 pounds)

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Written by Kate Holden; Additional reporting by Elizabeth Piper, Andrew MacAskill, Sarah Young, Andy Bruce, Muvija M, and Sachin Ravikumar; Editing by Gerry Doyle, Kate Holden and Alex Richardson

Our Standards: Thomson Reuters Trust Principles.

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