Jeremy Hunt, the new chancellor, has confirmed that nearly all the tax measures announced in the Growth Plan on September 23rd are to be reversed.
Only the cuts to stamp duty paid on house purchases and the scrapping of the National Insurance hike will continue.
However, all the tax measures that have not started parliamentary legislation will not go ahead.
What has been scrapped?
- A planned 1p reduction in the basic rate of income tax. This is to be put on hold indefinitely, until economic circumstances allow it to be cut. The Government had announced that it would be cut from 20p in the pound to 19p in the pound in April 2023 – a year earlier than had originally been intended
- Cuts to dividend tax rates – the 1.25% increase in dividend tax rates was to have been reversed from April 6th
- The reversal of off-payroll working reforms, also known as IR35 rule changes
- VAT-free shopping for non-UK visitors
- The freeze on alcohol duty rates
- This comes shortly after the government u-turned on its plans to scrap the top income tax rate and freeze corporation tax.
What else has been announced?
Energy Price Guarantee scheme scaled back
The Energy Price Guarantee, which would have capped typical household energy bills at £2,500 annually until 2024, will now only last until April next year.
Mr Hunt also confirmed that the Treasury will lead a review into how households and businesses can be helped with energy bills beyond this point.
The Chancellor said 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”.
Furthermore, he stated that any support for businesses will be targeted to those most affected, with a focus on incentivising energy efficiency.
Public spending cuts on the way
Mr Hunt announced that all government departments will have to “redouble their efforts” to find savings and that “some areas of spending will need to be cut”.
However, he insisted that its “priority in making the difficult decisions that lie ahead will always be the most vulnerable”, and added he remains “extremely confident” about the UK’s long-term economic prospects.
What happens next?
The market response to the Chancellor’s statement was broadly positive, with the pound rising and government borrowing costs falling following his announcement.
Mr Hunt will then deliver a full Medium-Term Fiscal Plan on October 31st, which will be accompanied by a forecast from the independent Office for Budget Responsibility.
However, the Chancellor’s statement means nearly every element of the Mini Budget has now been scrapped.
The fallout from the Growth Plan announcement on September 23rd has already led to previous Chancellor Kwasi Kwarteng being sacked, and there is now widespread speculation about the political future of Prime Minister Liz Truss, who took office only last month.