Britain’s new Finance Minister Jeremy Hunt on Monday reversed most of the tax cuts and spending plans that Prime Minister Liz Truss had announced less than a month ago.
The move comes three days after Truss fired Kwasi Kwarteng as the finance minister and scrapped parts of her government’s mini Budget announced on September 23.
The government had announced a programme of tax cuts and investment incentives to boost the United Kingdom’s economy. The country is currently facing an economic crisis, with many citizens struggling to cope with rising costs of living, inflation, and increasing power bills.
The decision had led to loss of investor confidence with the bond market facing a setback and borrowing costs surged, reported Reuters.
On Monday, the newly-appointed finance minister announced a reversal of almost all of the tax measures in the Growth Plan that have not been legislated in Parliament.
Hunt reversed the plan of cutting the basic rate of income tax by 1% to 19% from April 2023 that was part of the mini Budget. “At a time when markets are rightly demanding commitment to sustainable public finances, it is not right to borrow to fund this tax cut,” said Hunt.
However, Hunt said that the government aims to proceed with the cut in due course but only when economic conditions allow it and the change is affordable.
For now, the basic rate of income tax will remain at 20% indefinitely that is worth around £6 billion (Rs 56,173 crore) a year, he said.
The other tax cuts announced by Kwarteng that have been reversed by Hunt are slashing down dividend taxes by 1.25 percentage points, repealing changes to the off-payroll working rules, introducing a Value Added Tax-free shopping scheme for the non-UK visitors to Great Britain and freezing some duties on alcohol.
Reversing all these tax cuts are estimated to be worth around £32 billion (Rs 2.99 lakh crore) a year.
However, Hunt said that the government’s scheme to cap energy prices for two years, costing about £80 billion (Rs 7.5 lakh crore), would be applicable up to April only.
“Looking beyond April, the prime minister and the chancellor have agreed that it would be irresponsible for the government to continue exposing the public finances to unlimited volatility in international gas prices,” said the UK government.
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