LONDON (AP) — The UK’s new Treasury chief ripped up the government’s economic plan on Monday, dramatically reversing most of the tax cuts and spending plans that Prime Minister Liz Truss announced less than a month ago.
In a televised address, Chancellor of the Exchequer Jeremy Hunt said he was scrapping “almost all” of Truss’ tax cuts, along with her flagship energy policy and her promise — repeated just last week — that there will be no public spending cuts.
While the reversal of policy calmed financial markets, it further undermined the prime minister’s rapidly crumbling authority and fueled calls for her to step down before her despairing Conservative Party forces her out.
Such major policy announcements are normally made first in the House of Commons. However, after an agreement with the speaker of the House, it was left to Hunt — rather than Truss — to deliver the calming message to the markets, weeks earlier than he had planned.
Hunt was appointed Friday after Truss fired his predecessor Kwasi Kwarteng, who spent less than six weeks in the Treasury job. Truss and Kwarteng jointly came up with a Sept. 23 announcement of 45 billion pounds ($50 billion) in unfunded tax cuts that spooked financial markets, sent the pound to record lows and forced the Bank of England to take emergency action.
Over the weekend, Hunt has been dismantling that economic plan. The government had already ditched parts of its tax-cutting plan and announced it would make a medium-term fiscal statement on Oct. 31.
On Monday he went further. He scaled back a cap on energy prices designed to help households pay their bills. It will now be reviewed in April rather than lasting two years — sweeping away one of Truss’ signature plans.
Hunt’s moves are aimed at restoring the government’s credibility for sound fiscal policy after Truss and Kwarteng rushed out a plan for tax cuts without detailing how they would pay for them.
He spent the weekend in crisis talks with Truss, and also met with Bank of England Gov. Andrew Bailey and the head of the government’s Debt Management Office.
The financial fiasco has turned Truss into a lame-duck prime minister, and Conservative lawmakers are agonizing about whether to try to oust her. She took office just six weeks ago after winning a party election to replace Prime Minister Boris Johnson, who was forced out in July after serial ethics scandals ensnared his administration.