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.
The UK has joined US forces in attacking a Houthi target in Yemen for the first time since Donald Trump was re-elected.
The Ministry of Defence (MoD) confirmed the strikes took place on Tuesday as part of the government’s response to Houthi attacks on international shipping in the Red Sea and Gulf of Aden.
The ministry said careful intelligence analysis identified a cluster of buildings used by the Houthis to manufacture the sort of drones used to attack ships, located 15 miles south of the capital Sanaa.
RAF Typhoon FGR4s conducted strikes on several buildings using Paveway IV precision-guided bombs.
The planes had air refuelling support from Voyager tankers.
The ministry said the strike was conducted after dark to reduce the likelihood of civilians being in the area.
All the aircraft returned safely.
John Healey. Pic: Reuters
Defence Secretary John Healey said: “This government will always act in the interests of our national and economic security.
“Royal Air Force Typhoons have successfully conducted strikes against a Houthi military target in Yemen and all UK aircraft and personnel have returned safely to base.
“We conducted these strikes, supported by the US, to degrade Houthi capabilities and prevent further attacks against UK and international shipping.”
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Houthis a ‘persistent threat’ to ‘freedom of navigation’
Mr Healey said Houthi activities in the Red Sea are a “persistent threat” to “freedom of navigation”.
“A 55% drop in shipping through the Red Sea has already cost billions, fuelling regional instability and risking economic security for families in the UK,” he said.
“The government is steadfast in our commitment to reinforcing global stability and protecting British working people. I am proud of the dedication and professionalism shown by the service men and women involved in this operation.”
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US intensifies strikes on Houthis
It was the first time UK forces have struck a target in Yemen since May last year, the ministry confirmed.
The US has intensified its strikes on the Iran-backed Houthis under Mr Trump’s presidency, after his re-election in November 2024.
The group began launching attacks on shipping routes in November 2023 saying they were in solidarity with Palestinians over Israel’s war with Hamas in Gaza.
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Footage showing people being pulled from rubble has been released by Houthi rebels in Yemen
The strike came after a Houthi-controlled TV channel claimed a US strike killed 68 people at a detention centre for African migrants in Yemen on Monday.
UK
No criminal charges over death of ice hockey player Adam Johnson whose neck was cut by opponent’s skate
No criminal charges will be brought over the death of an ice hockey player who died during a match in Sheffield, prosecutors have announced.
Nottingham Panthers’ Adam Johnson died in October 2023 after his neck was cut by an opposition player’s skate during a match at Sheffield’s Utilita Arena.
The Sheffield Steelers player, Matthew Petgrave, was arrested on suspicion of manslaughter and later bailed – but the Crown Prosecution Service (CPS) has now said it will not bring criminal charges against the Canadian.
Michael Quinn, deputy chief crown prosecutor, said: “This was a shocking and deeply upsetting incident. The CPS and South Yorkshire Police have worked closely together to determine whether any criminal charges should be brought against the other ice hockey player involved.
“Following a thorough police investigation and a comprehensive review of all the evidence by the CPS, we have concluded that there is not a realistic prospect of conviction for any criminal offence and so there will not be a prosecution.
“Our thoughts remain with the family and friends of Adam Johnson.”
Tributes were left outside the Motorpoint Arena in Nottingham following the ice hockey player’s death. Pic PA
Before joining Nottingham Panthers, the Minnesota-born Johnson played in Pennsylvania for the Pittsburgh Penguins, and Sweden for the Malmo Redhawks.
He also played in California for Ontario Reign and in Germany for Augsburger Panther.
A post-mortem examination confirmed the 29-year-old died as a result of the fatal neck injury.
The crowd of 8,000 spectators watched in horror as desperate attempts were made to save his life as he lay on the ice, shielded by fellow players.
The game was abandoned and spectators were asked to leave in the aftermath.
Pic PA
Kari Johnson, Johnson’s aunt, was watching the match via a livestream with his father and grandmother when he was fatally injured.
Speaking to Sky News at the time, Ms Johnson said: “It was a mess, it was a nightmare, it was like it wasn’t real. We were in shock, we couldn’t believe this was happening.”
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Kari Johnson said her nephew was ‘a kind soul’
Ms Johnson described her nephew as a “kind soul” and a “private kid” who “never would have wanted to be in the limelight like this”.
He simply wanted to be “good at hockey and have fun”, she said, adding he was “having the time of his life in the UK” and was planning to get engaged to his girlfriend.
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In January 2024, Sheffield’s senior coroner, Tanyka Rawden, suspended her investigation while the police inquiry took its course.
It later emerged that Ms Rawden had issued a Prevention of Future Deaths Report to Ice Hockey UK and the English Ice Hockey Association (EIHA) about the use of neck guards in the sport.
In the report, Ms Rawden said she was “sufficiently concerned that deaths may occur in the future if neck guards or protectors are not worn”, with the bodies given 56 days to say what action had been taken – or why action had not been taken.
Neck guards have been mandatory in the Elite League (EIHL), in which the Nottingham Panthers and Sheffield Steelers compete, since January 2024.
This followed the International Ice Hockey Federation’s decision in December to mandate the use of neck laceration protectors for its competitions.
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