Britain’s new prime minister, Jeremy Hunt, will “torch” most of his predecessor Kwasi Kwarten’s tax cuts Monday morning to calm markets, and later ministers will meet to discuss new spending restraints.
The Treasury Department said Hunt, who was appointed prime minister on Friday, will announce plans to tackle the government’s deficit at 11 a.m., two weeks ahead of schedule, before issuing a statement to the House of Commons this afternoon.
According to an official briefed on Mr Hunt’s plans, most of the tax measures in the disastrous ‘mini’ budget on September 23rd will be a £13bn reduction in national insurance and a £1.5bn change in stamp duty. will be “burned” except
Hunt agreed an emergency statement with Prime Minister Liz Truss on Sunday after concluding that the government could not afford another hit in the market this week.
The government had planned to make the announcement on Oct. 31 as part of its medium-term debt reduction plan, but it has already been brought forward from Nov. 23.
Truss has withdrawn a £20bn tax cut since Kwarten announced a ‘mini’ budget on 23 September that included a £45bn underfunded tax cut, but that has not allayed market concerns. , gold coin yields continued to rise on Friday.
“Slicing salami didn’t work,” admitted one government official. Market participants warned Mr. Truss last week that the turmoil would continue unless he announced a significant tax increase.
The Fiscal Institute says £60bn of fiscal tightening is needed to add up, suggesting Hunt must go further with undoing tax cuts, raising taxes and cutting spending.
A one-percentage-point income tax cut, costing around £5 billion, is expected to be put on hold next April, but it is expected to only represent the beginning of another series of U-turns.
VAT rules for foreign shoppers, a new dividend tax rate and the withdrawal of plans to reform the IR35 non-payroll system will save around £5bn more.
A £13 billion reduction in National Insurance contributions, backed by the opposition Labor Party, is one of the few measures expected to survive. £1.5bn worth of stamp duty changes have already been implemented.
On Monday morning, the pound rose on news of Hunt’s planned statement, trading at $1.129 against the dollar, up 1.1% for the day. The pound also rose 0.8% against the euro to 1.158 euros.
Trading in UK government bonds was scheduled to open at 8am London time. Gilts came under renewed selling pressure on Friday as investors warned that Kwarteng’s dismissal and his Uhi turn on corporate tax cut plans would not be enough to restore confidence in the UK market. rice field.
Yields on 30-year gold leaf closed last week at around 4.7%. When bond prices fall, bond yields rise.
Hunt also plans to announce new spending cuts to balance the books and reduce debt by the end of the Office of Budget Responsibility’s five-year forecast period.
These cuts and “efficiency savings” will be discussed by ministers at a reception in Downing Street on Monday night and again at a formal ministerial meeting on Tuesday.
The Treasury Department said Monday morning:
“This follows the prime minister’s statement on Friday, with further conversations between the prime minister and the prime minister over the weekend to ensure sustainable finances support economic growth.
“The prime minister will then submit a full medium-term financial plan that will be released with projections from the independent Budget Responsibility Office on October 31.”
Hunt met with Bank of England Governor Andrew Bailey and the Debt Management Office on Sunday to discuss plans.
