New Chancellor Jeremy Hunt has reversed almost all of the tax cuts originally announced in his predecessor’s mini budget, limited the degree of energy help beyond April 2023 and committed to further difficult decisions on tax and spending in order to put UK finances on a sustainable footing.
Commenting on the changes in policy, RLAM Head of Multi Asset Trevor Greetham said:
“Never before has the outlook for UK public finances swung so dramatically, from the unfunded and uncosted profligacy of the Truss-Kwarteng plan to what can only be described as Austerity 2.0. Jeremy Hunt has cancelled almost all of the planned tax cuts at a saving of £32 billion while signalling further difficult decisions to come on both taxes and public spending.
“The boldest and most surprising element of this announcement was a review of energy support beyond April 2023 to target help more effectively, reduce the eventual cost to the tax payer and to make UK finances less dependent on the path of European gas prices during the Ukraine war.
“The bond markets should love what Hunt has to say and lower yields would help to reduce pension fund turmoil, but the strength of reaction may be tempered by concerns over political stability. There was no mention today of the raft of unpopular deregulatory measures, dubbed Operation Rolling Thunder by Downing Street aides, that were due to be revealed after 31 October. It remains to be seen if Prime Minister Liz Truss can remain in control of her party to push through what remains of her agenda.”
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The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.