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Truss, Liz

UK Treasury Chief Scraps Most of Truss' Economic Plan

Strategic Insights

— 2 min read

In a dramatic reversal, new UK Chancellor of the Exchequer Jeremy Hunt scrapped most of Prime Minister Liz Truss' economic plan on Monday, undoing the tax cuts and spending plans announced just a month ago. The sudden change has raised questions about how long Truss can stay in office. The move aims to restore the government's economic credibility, but it further undermines Truss' authority, fuelling calls for her resignation.

Key Takeaways:

  • Jeremy Hunt, the new UK Chancellor of the Exchequer, scrapped "almost all" of Prime Minister Liz Truss' tax cuts, including her flagship energy policy and promise of no public spending cuts.
  • The reversal of policy calmed financial markets and restored the government's economic credibility, but it further undermined Truss' authority and fuelled calls for her resignation.
  • The UK government had announced £45 billion pounds ($70 billion) in unfunded tax cuts on September 23, which spooked the financial markets and sent the pound to record lows.
  • Truss' plan to reduce the basic rate of income tax by one percentage point was also scrapped, with Hunt saying that "at a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut."
  • The government has ditched parts of its tax-cutting plan and announced it would make a medium-term fiscal statement on October 31, weeks earlier than previously scheduled.
  • Hunt's moves aim to restore the Conservative government's credibility for sound fiscal policy after Truss and her predecessor, Kwasi Kwarteng, rushed out a plan for tax cuts without detailing how they would pay for them.
  • Truss declined to attend the House of Commons to answer a question on the economy, sending House of Commons leader Penny Mordaunt in her place.
  • Truss' spokesperson said the prime minister and Hunt had jointly agreed on the economic changes.

Statistics:

  • £45 billion pounds ($70 billion) in unfunded tax cuts announced by Truss and Kwarteng on September 23.
  • 1 percentage point reduction in basic rate of income tax proposed by Truss, which was scrapped by Hunt.
  • 6 weeks in the Treasury job spent by Kwasi Kwarteng, who was fired by Truss.
  • 2 years duration of energy price cap, which was scrapped by Hunt in favour of a review in April.
  • Weeks earlier than previously scheduled, the medium-term fiscal statement will be made on October 31.

Sources:

  • "UK's new Treasury chief rips up economic plan in effort to calm markets" - The Associated Press.
  • "Britain's government scraps nearly all of Liz Truss's economic plan" - The Associated Press.
  • "UK Treasury chief Jeremy Hunt scraps most of Liz Truss's economic plan" - The Associated Press.

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