New British minister reverses tax cut and chooses to limit energy subsidy

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Britain’s new finance minister, Jeremy Hunt, on Monday reversed nearly all of Prime Minister Liz Truss’s mini-budget, which had caused market turmoil, and chose to cap the vast energy subsidy plan, saying the country needs to regain investor confidence.

Hunt, appointed on Friday to fix public finances after Truss’ economic plan hurt the value of British assets, said the country needed to build confidence and stability before it could pursue economic growth.

He said changes to planned tax cuts will raise £32bn ($36bn) each year. Government spending cuts will also be needed to close a hole in public finances that the Sunday Times reported to be 72 billion pounds ($81 billion).

“I remain extremely confident about the UK’s long-term economic outlook as we fulfill our mission to move towards growth,” he said. “But growth requires trust and stability, and the UK will always blaze its own trail.”

The near-total reversal of the economic plan leaves Truss, Britain’s fourth prime minister in six years, struggling to survive in Downing Street less than six weeks after coming to power promising bold tax cuts and deregulation to reignite economic growth.

She was forced to reverse course after markets reacted violently to her plan, driving down the value of the pound and the prices of government bonds and forcing the Bank of England to step in to protect pension funds.

The Bank met its schedule of ending support on Friday, increasing pressure on Hunt over the weekend to find ways to reduce spending before bond markets reopen.

While there was an expectation that he would reverse some of the tax cuts, the change in the energy support scheme was unexpected.

Truss had announced a two-year subsidy scheme to support households and businesses during the period of rising energy prices, costing £60bn in six months. Hunt said on Monday that the scheme will now run through April, but on a more targeted and limited basis after that.

Hunt will still deliver a more complete mid-term fiscal plan as scheduled on Oct. 31, along with forecasts from the Office of Budget Accountability, which is independent, the Treasury said.

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