Almost all of prime minister Liz Truss’s tax plans have already been withdrawn after a few weeks. The new Finance minister Jeremy Hunt announced on Monday. The tax plans of Truss and Hunt’s predecessor Kwasi Kwarteng caused the British pound to fall in value and bond yields to rise rapidly. Quarteng was fired on Friday.
Truss and Kwarteng submitted a preliminary budget last month, aiming to help the stagnant UK economy grow faster. For example, a reduction in income tax was planned, a tax box for the very rich went out, and corporate income tax was to be reduced. The tax cuts were accompanied by an aid package to keep utility bills affordable, resulting in a gaping hole of tens of billions in the budget.
Financial markets were shocked by that gap, causing the British pound to drop rapidly in value and bond market interest rates to rise rapidly. As a result, many Britons suddenly saw their mortgage payments rise and pension funds also got into trouble.
Prime Minister Truss first held her leg stiff last week, but eventually decided to intervene anyway. The planned corporate tax cut was scrapped, the tax box for the very rich remained, and ally Kwarteng was fired. He was succeeded by the experienced Hunt.
Hunt tried to calm those markets further on Monday by not lowering the income tax anyway. The support package to keep the energy bill affordable is also being examined. This reduces the gap in the budget.
With Hunt’s measures, virtually all of Truss ‘ tax plans have been turned upside down. Monday’s announcement is painful for the prime minister. Tax cuts were supposed to be the flagship of her premiership.