Jeremy Hunt just reversed almost all of Kwasi Kwarteng’s mini-budget

Written by Katie Rosseinsky

Just got your head around Kwasi Kwarteng’s controversial economic policies? New chancellor Jeremy Hunt has just announced a drastic change of course.

It has been a turbulent few weeks for the UK economy.

When Kwasi Kwarteng, then the chancellor of the exchequer, unveiled his mini-budget in September, promising sweeping tax cuts, he was criticised for seemingly prioritising the wealthiest in society at a time when many are struggling with the soaring cost of living.

The value of the pound against the dollar reached a historic low, and Kwarteng announced a major U-turn on his plans to scrap the top rate of tax for the highest earners. Weeks later, on 14 October, Kwarteng was sacked as chancellor and replaced by Jeremy Hunt.

Hunt, who previously served as health secretary under David Cameron and Theresa May, has wasted no time in undoing his predecessor’s work, setting out changes which will effectively undo “almost all” of the controversial mini-budget in a statement today.

From the alterations to the much-discussed energy price cap to the plans for National Insurance, here’s what you need to know about Hunt’s fiscal statement – and how it will affect you… 

The energy price guarantee won’t last as long

Responding to skyrocketing energy bills last month, the prime minister imposed an energy price freeze that would cap the average energy bill at £2,500 (in contrast to the previously announced Ofgem price cap set at £3,549) until 2024, with unit rates set at around 34p per kilowatt hour for electricity and 10.3p per kwh for gas.

Hunt has now announced that the energy price guarantee will be reviewed in April 2023, meaning that bills could rise from then.

“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,” he said today. It seems, then, that energy support measures won’t be done away with altogether from April, but they may be more targeted in nature.

“While energy intervention was desperately needed – a universal energy price guarantee was always expensive and poorly targeted,” Money Saving Expert’s Martin Lewis wrote on Twitter earlier today, alluding to the criticism that the policy best served wealthier households who tend to consume more energy. “The post-April support will still need [to] reach a decent way up the net and support middle earners, [as] energy rates are still huge.”

The basic rate of tax will stay the same

Sunak had previously intended to cut the basic rate of income tax from 20% to 19% in April 2024. In Kwarteng’s mini-budget, that cut was brought forward by one year, but Hunt has now put those plans on hold indefinitely, with the government aiming to go ahead with it only when the economic conditions are more favourable. This delay could save the Treasury about £5 billion a year. 

 Changes to stamp duty will remain… 

One part of Kwarteng’s mini-budget that his successor has chosen not to walk back is the change to stamp duty. The threshold for the tax on property purchases doubled last month from £125,000 to £250,000, and this is set to stay the same.

First-time buyers will also still not pay tax on the first £425,000 of their house price (up from £300,000) and can continue to claim stamp duty relief on properties priced up to £625,000 (up from £500,000). 

New Chancellor of the Exchequer Jeremy Hunt

And so will the planned cut to National Insurance 

Though National Insurance, the tax on earnings and profits, increased in April by 1.25%, Kwarteng announced in his mini-budget that this will be reversed come November, and Hunt is set to stick to this policy.

The Treasury has previously said that this change will save around 28 million people an average of £330 each year. 

VAT-free shopping for foreign visitors and the freeze on alcohol duty rates have been scrapped

Neither of these policies got much air time amid Kwarteng’s raft of tax cuts, but plans for VAT-free shopping for foreign visitors to the UK and a freeze on alcohol duty rates, due to kick in from 1 February next year, have also been ripped up. 

Cuts to public spending are on the horizon

In a message today, Hunt said that this series of mini-budget U-turns would not be enough to stabilise the UK’s finances, and heavily hinted that serious spending cuts lie ahead.

“There will be more difficult decisions to take on both tax and spending as we deliver our commitment to get debt falling as a share of the economy over the medium term,” he said.

“All departments will need to redouble their efforts to find savings, and some areas of spending will need to be cut,” he continued, adding that he and the government will “make whatever tough decisions are necessary” to restore “confidence and stability”. 

Images: Getty

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