Sign in Subscribe
Truss, Liz

UK Finance Minister Reverses Nearly All of Prime Minister's Mini-Budget Amid Market Turmoil

Strategic Insights

— 1 min read

Jeremy Hunt, the new finance minister, sought to rebuild investor confidence in Britain by reversing nearly all of Prime Minister Liz Truss's mini-budget, which had sparked market turmoil. The move, aimed at halting a bond market rout, involves increasing taxes and cutting spending to restore stability and confidence. The pound soared by as much as 1.4% after the statement, while British government bonds rallied aggressively. The government has been forced to reverse course after markets reacted violently to Truss's plan, hammering the value of the pound and government bond prices.

Key Takeaways:

  • The UK government has reversed nearly all of Prime Minister Liz Truss's mini-budget, including a two-year energy support scheme expected to cost over £100 billion.
  • The scheme will be replaced by a more targeted plan that will "cost the taxpayer significantly less than planned".
  • Finance Minister Jeremy Hunt has announced changes to planned tax cuts, which will raise £32 billion every year.
  • The government has been forced to reverse course after markets reacted violently to Truss's plan, hammering the value of the pound and government bond prices.
  • The Bank of England has been forced to intervene to protect pension funds.
  • The government has announced spending cuts to narrow a hole in public finances, reportedly as big as £72 billion.
  • The opposition Labour Party has criticized the Conservative government's lack of credibility.
  • The new finance minister will still deliver a fuller medium-term fiscal plan as scheduled on October 31.

Statistics:

  • The pound soared by as much as 1.4% to a session high of $1.1332 after the statement.
  • British government bonds rallied aggressively, looking on course for one of their biggest daily price increases since records began.
  • The government plans to raise £32 billion every year from changes to tax cuts.

Sources:

  • Reuters: "UK to reverse almost all mini-budget tax cuts, Hunt says"

Read more