SHOW OF TRUSS
Hunt warns of ‘difficult decisions’ to come in Oct 31 debt plan as he & Truss face down MPs after ripping up tax cuts
JEREMY Hunt faced down MPs in parliament this afternoon after tearing Liz Truss' mini-Budget to shreds today in a bombshell statement.
In a bid to reassure nervous markets, the Chancellor announced this morning that a planned 1p cut to the basic tax rate will be delayed "indefinitely".
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And Mr Hunt also confirmed that the Energy Price Guarantee - which sees the typical bill capped at £2,500 - will only last until April, instead of October next year.
The Treasury will review how hard-up Brits should be supported from that point on.
It comes as:
- The energy price guarantee of average £2,500 a year bills will be only capped until April - with support for the richest households to end after that
- The 1p off income tax planned for next April has been junked
- The planned reforms to offroll pay working will go ahead as planned - and won't be ditched as Kwasi Kwarteng wanted
- Cutting VAT for foreign tourists visiting the UK will be ditched
- The cuts to National Insurance and slashing of stamp duty will remain
- That comes on top of the u-turn not to ditch the top 45p rate of tax, and to ditch plans to cut corporation tax - which have already been announced
The National Insurance hike will still be scrapped and cuts to stamp duty will stay.
But all other mini-Budget tax slashing promises have been dumped in the bin.
These include scrapping VAT for foreign tourists visiting the UK and freezing alcohol duty rates from next year.
The massive policy cull is estimated to save £32bn per year.
Government bonds rose and the pound went up by more than 2% against the dollar as Mr Hunt unleashed the U-turn blitz.
However, more efficiencies are still needed to balance the books, and Whitehall departments have been ordered to find ways to save money.
Mr Hunt said: "As I promised at the weekend, our priority in making the difficult decisions that lie ahead will always be the most vulnerable and I remain extremely confident about the UK's long-term economic prospects as we deliver our mission to go for growth.
"But growth requires confidence and stability, and the United Kingdom will always pay its way.
"This Government will therefore make whatever tough decisions are necessary to do so."
The Chancellor warned: “There will be more difficult decisions to take on both tax and spending.
"All departments will need to redouble their efforts to find savings, and some areas of spending will need to be cut.”
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The Chancellor's statement is the latest government effort to calm jittery markets after borrowing costs continued to increase on Friday.
Further details on the Treasury's plans came this afternoon, when Mr Hunt made a second statement in the Commons.
Before that, at 3.30pm, Labour secured an Urgent Question in the Commons to ask the PM about the economic situation and have her explain why Mr Kwarteng was fired.
But Ms Truss refused to show up and answer the question. She sent in former leadership rival Penny Mordaunt to speak on her behalf.
Ms Mordaunt denied Ms Truss was cowering from MPs.
She told the Commons: “The Prime Minister is not under a desk”.
The PM did show up for Mr Hunt's afternoon statement.
There, he announced the formation of a new "economic advisory council" to advise the government on economic policy.
He also warned extremely difficult decisions to come.
Mr Hunt said: "This government will take the difficult decisions necessary to ensure there is trust and confidence in our national finances.
"That means decisions of eyewatering difficulty. But I give the house and the public this assurance, every single one of those decisions, whether reductions in spending or increases in tax will be shaped through core compassionate conservative values."
For weeks financial markets have suffered as a result of the PM's disastrous mini budget.
The tax slashing bonanza spooked the City after it failed to clarify how £45bn of cuts would be paid for.
Today, Mr Hunt unveiled his Medium Term Fiscal Plan to undo the damage.
The plan was due to happen on October 31 to reassure markets Britain has a strategy to pay down its soaring debts.
But Mr Hunt is wasting no time trying to show the public that the Treasury is under new management, after Kwasi Kwarteng was fired last Friday.
Follow the latest developments on Jeremy Hunt's statement here....
The value of the pound went up and bonds rallied as Mr Hunt announced his mega u-turns on tax cuts.
Emphasis on stability was warmly received by foreign exchange with the pound trading 1.3% higher against the dollar to $1.13.
And as Mr Hunt made his statement, yields on 30 year gilts carried on falling by 0.4% to 4.36%.
A third statement on the Medium Term Fiscal Plan will still go ahead on Halloween.
The Office for Budget Responsibility's assessment of the plan will be published then, and a government decision on whether to uprate benefits in line with inflation will also be revealed.
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Today's announcement comes after plans to freeze Corporation Tax and axe the 45p top rate were dropped earlier this month amid pressure from markets and Tory rebels.
The two humiliating u-turns were welcomed by MPs, but didn't do enough to stabilise markets.
Mr Hunt and Ms Truss are understood to have discussed and signed off the measures announced in today's statement over the weekend at the PM's Chequers retreat.
Chair of the Treasury Select Committee Mel Stride said making an early statement was a "strong start" for Mr Hunt, who gets what needs to be done and is acting fast."
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He added: "Positive move with two strong upside surprises for the markets."
Yesterday, the Chancellor insisted Liz Truss is still "in charge" of the government despite Trussonomics being ditched.
He said the party have 18 months to turn their fortunes around before an election as he signalled painful spending cuts to come.
Brought in to replace the sacked Mr Kwarteng and restore credibility to Downing Street, Mr Hunt is now widely seen as the most powerful figure in Government as he attempts to reshape the Prime Minister's own economic plans to reassure the markets.
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But he told the BBC that Ms Truss remains "in charge" and insisted voters can still put their faith in her.
He said: "She's listened. She's changed. She's been willing to do that most difficult thing in politics, which is to change tack.
"What we're going to do is to show not just what we want but how we're going to get there."
Less convinced, Ben Bradley, who backed Ms Truss to be leader, tweeted: "Well, that effectively renders all the political fallout, criticism, dive in the polls etc of the last few weeks entirely pointless doesn't it... Right back where we started, just far less popular than before."
This week the PM will battle to save her career, as fallout from the disastrous mini budget caused uproar among the Tory back benches.
This afternoon a defiant Ms Truss vowed she's not going anywhere.
This evening she will speak at a meeting of the One Nation caucus of Conservative MPs to beg for their support.
Ms Truss will also host a reception for cabinet ministers at 7.30pm.
So far three MPs have called for the PM to resign. They are: Crispin Blunt, Andrew Bridgen and Jamie Wallis.
But this morning Damian Green, leader of the One Nation group, said the PM should lead the party into the next election.
He said: "If she leads us into the next election that will mean that the next two years will have been more successful than the past four weeks have been."
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Last night a bombshell poll by Opinium showed the Tories are on course to lose 219 seats at the next general election.
Meanwhile, in a 1997 style wipe-out, Labour is projected to win 411.
Cabinet heavyweights including Deputy PM Therese Coffey and Business Secretary Jacob Rees-Mogg would lose their seats.
Today Labour called for the PM to stand down.
Responding to this morning's statement, Shadow Chancellor Rachel Reeves said: “The damage has been done. This is a Tory crisis made in Downing Street, paid for by working people, paying higher mortgage and borrowing costs.
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“The Conservatives have lost all credibility."
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