Chancellor reverses ‘almost all’ tax cuts in mini-budget and says energy bills support scheme to be scaled back
Jeremy Hunt has revealed he is reversing “almost all” of the tax cuts announced in his predecessor’s mini-budget and is scaling back support on energy bills.
In an emergency statement, the chancellor said a 1p cut to income tax will be delayed “indefinitely” until the UK’s finances improve instead of being introduced in April 2023 as announced in Kwasi Kwarteng’s mini-budget three weeks ago.
Mr Hunt, who only stepped into the job on Friday, said the government’s energy price guarantee will only be universal until April – not for two years as originally planned.
After April, the scheme will be more targeted following a review into how to support people’s energy bills from that time, he said.
“The government has today decided to make further changes to the mini-budget, and to reduce unhelpful speculation about what they are, we’ve decided to announce these ahead of the medium-term fiscal plan, which happens in two weeks,” Mr Hunt said.
He said the government was reversing “almost all” the tax measures announced in the mini-budget that have not yet started going through parliament.
The new tax measures would bring in £32 billion after economists estimated the government was facing a £60bn black hole in public finances with the mini-budget announcements.
The changes Mr Hunt revealed include:
- No cuts to dividend tax rates
- Repeal of the easing of IR35 rules for the self-employed introduced in 2017 and 2021
- No new VAT-free shopping scheme for overseas visitors to the UK
- No freeze on alcohol duty rates
- Basic rate of income tax to remain at 20%, not reduce to 19% from April 2023
- Energy price guarantee only until April 2023.
Mr Hunt promised: “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 most important objective for our country right now is stability.”
As Mr Hunt revealed the tax cut reversals, the pound strengthened by more than 1.2% to 1.139 against the US dollar and UK government bonds rallied further, with yields on 30-year gilts easing back by around 10%.
Widely seen as the most powerful person in government now, Mr Hunt added that there will be “more difficult decisions” on tax and spending” and said all government departments “will need to redouble their efforts to find savings, and some areas of spending will need to be cut”.
The mini-budget tax cuts that will not be reversed as they are already going through parliament, are: Cancelling the Health and Social Care Levy tax due to take place in April 2023 and the stamp duty cut.
Ms Truss’ spokesman said Monday’s decision was taken jointly by the PM and Mr Hunt over the weekend and again admitted the mini-budget went “too far, too fast”.
But he sidestepped questions about whether Ms Truss would resign after another Tory joined those who started publicly calling for her to go over the weekend.
Sky News’ political editor Beth Rigby said this row back on the mini-budget is a major blow for Liz Truss, just six weeks into her premiership.
“The entire platform of the Truss administration is gone, is gone. It’s done,” she said.
“It’s genuinely shocking in terms of how a prime minister and her cabinet got this so wrong and had to reverse in such a dramatic way.”
“It’s not just the tax decisions in the mini-budget that the new chancellor now says are just not viable.
“He’s now saying that the policy platform, her big shock and awe announcement as it was billed in the run-up to that announcement is also just economic, not viable. And that is another body blow to the prime minister today.”
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‘We think she should go’ – Labour
Scottish First Minister Nicola Sturgeon used a news conference about Scottish independence shortly after Mr Hunt’s statement to say the government turmoil is “a self-inflicted crisis for Liz Truss” and “is humiliating in quite an unprecedented way”.
“I think the sooner this prime minister and this entire government departs office, the better that will be for everyone.” she added.
Labour’s shadow chancellor, Rachel Reeves, said Mr Hunt’s statement shows “the damage has been done” and said “this is a Tory crisis made in Downing Street, paid by working people with higher mortgage and higher borrowing costs”.
She said the Conservatives have “lost all credibility” and families will continue to endure huge costs.
“We’re still flying blind with no OBR forecasts and no clarity on the impact of their mistakes,” she added.
In a bid to calm the markets, the Treasury announced at 6am on Monday Mr Hunt was going to reveal parts of his medium-term fiscal plan – which was due to take place on 31 October.
Over the weekend, Mr Hunt promised to slow down Ms Truss’ tax cuts and said “some taxes will go up” as he worked on tearing up the mini-budget that has caused weeks of economic turmoil.
His comments were welcomed by the Bank of England’s governor, Andrew Bailey, who said there had been an “immediate meeting of minds on the importance of stability and sustainability” when he spoke to Mr Hunt on Friday.
The decision for Mr Hunt to make a statement on Monday was made after meetings between the chancellor, Ms Truss, Mr Bailey and the head of the Debt Management Office on Sunday night.
It has become almost impossible to book a driving test on the government website due to bots on the booking system, driving instructors have told Sky News.
The only official way to book a practical car driving test is through the Driver and Vehicle Standards Agency (DVSA) website.
New test slots are released by the DVSA at 6am every Monday, but “no matter how fast I am, there’s nothing available”, said Aman Sanghera, a driving instructor based in west London.
Driving instructor Aman Sanghera wants ‘stronger oversight and regulation’ from the DVSA
When asked about the cause, she said: “All of the tests are taken by bots, they are definitely taking over the booking system.”
In this context, bots are automated software designed to mimic human behaviour and programmed to carry out actions like searching for and reserving driving test appointments on the official government website much faster than humans can.
Individuals and companies use bots to block-book driving test slots and then resell them at a profit, which is not illegal, although it is a violation of the DVSA’s terms of use.
Recent data shows the DVSA has closed over 800 business accounts for misuse of its booking service in the past two years.
It takes five months on average for a test in England – unless you pay a middleman
Ms Sanghera, who has been in the trade for over a decade, said the usage of bots started a few months ago “but is now getting out of hand”.
She said: “I’ve actually heard about driving instructors being approached by certain individuals to then take on their IDs to log in and to run this scam.
“I struggle to actually book a test for my students, which means that by the time my students are logging in, they’ve got no chance.”
Driving instructors can book driving tests on behalf of their pupils using a dedicated service, allowing them to bypass the general queue and potentially secure test slots more efficiently.
As a result, Ms Sanghera said students are “forced to go to third-party sites” to secure “the same test dates which are then available later on during the day at a premium rate of like £200-£300”.
She added: “Given that the DVSA is a government-regulated body, one would expect a more robust and fair system to ensure affordability and accessibility for all candidates.”
The long waiting lists and high demand for tests has led some to take advantage
The standard test fee is £62, offered by the DVSA, which is responsible for carrying out driving tests in Great Britain.
The biggest concern for the driving instructors Sky News has spoken to, including Ms Sanghera, is “the fact that students are being exploited”.
When Ahmed Ali struggled to find a practical test on the DVSA website, he turned to third-party sites – a decision he now regrets.
Ahmed Ali started looking for a test two years ago
He said: “I’ve spent about £650 on driving tests, and I’ve sat zero tests. I’ve given all this money to third-parties that look for cancellations so they could try to get you a faster test.”
But the 20-year-old said that despite making the payments, he “didn’t hear back from them again”, which is illegal.
“When you lose all that money, you get to a point where you can’t really afford to find another driving test,” he said.
“I just feel very frustrated because I’ve spent all this money, all this time into driving, and I haven’t sat a single driving test.”
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The DVSA urged applicants to only book tests via the official Gov.uk website and told Sky News it “deploys enhanced bot protection to help stop automated systems from buying up tests unfairly”.
“These applications, however, are constantly evolving and changing, and DVSA’s work on this is ongoing,” it said.
From Tuesday, the DVSA will require learner drivers to provide 10 full working days’ notice to change or cancel their car driving test without losing the test fee, up from the current three days.
Also part of the DVSA’s crackdown to reduce waiting times is a consultation expected to launch in spring 2025 “to streamline the driving test booking process” and “tighten terms and conditions”.
The last blast furnaces left operating in Britain could see their fate sealed within days, after their Chinese owners took the decision to cut off the crucial supply of ingredients keeping them running.
Jingye, the owner of British Steel in Scunthorpe, has, according to union representatives, cancelled future orders for the iron ore, coal and other raw materials needed to keep the furnaces running.
The upshot is that they may have to close next month – even sooner than the earliest date suggested for its closure.
Read more: Thousands of jobs at risk as British Steel consults unions over closure
The fate of the blast furnaces – the last two domestic sources of virgin steel, made from iron ore rather than recycled – is likely to be determined in a matter of days, with the Department for Business and Trade now actively pondering nationalisation.
The upshot is that even as Britain contends with a trade war across the Atlantic, it is now working against the clock to secure the future of steelmaking at Scunthorpe.
The talks between the government and Jingye broke down last week after the Chinese company, which bought British Steel out of receivership in 2020, rejected a £500m offer of public money to replace the existing furnaces with electric arc furnaces.
The sum is the same one it offered to Tata Steel, which has shut down the other remaining UK blast furnaces in Port Talbot and is planning to build electric furnaces – which have far lower carbon emissions.
These steel workers could soon be out of work
However, the owners argue that the amount is too little to justify extra investment at Scunthorpe, and said last week they were now consulting on the date of shutting both the blast furnaces and the attached steelworks.
Since British Steel is the main provider of steel rails to Network Rail – as well as other construction steels available from only a few sites in the world – the closure would leave the UK more reliant on imports for critical infrastructure sites.
However, since the site belongs to its Chinese owners, a decision to nationalise the site would involve radical steps government officials are wary of taking.
They also fear leaving taxpayers exposed to a potentially loss-making business for the long run.
The dilemma has been heightened by the sharp turn in geopolitical sentiment following Donald Trump’s return to the White House.
The incipient trade war and threatened cut in American support to Europe have sparked fresh calls for countries to act urgently to secure their own supplies of critical materials, especially those used for defence and infrastructure.
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Gareth Stace, head of UK Steel, the industry lobby group, said: “Talks seem to have broken down between government and British Steel.
“My advice to government is: please, Jonathan Reynolds, Business Secretary, get back round that negotiating table, thrash out a deal, and if a deal can’t be found in the next few days, then I fear for the very future of the sector, but also here for Scunthorpe steelworks.”
British Steel declined to comment.
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