It’s all change at the Treasury as the government attempts to repair some of the damage caused by the recent mini-Budget.
Tax cutting is out, and in is a more fiscally responsible Chancellor, with Jeremy Hunt taking over the role from freshly sacked Kwasi Kwarteng.
As part of the change, Prime Minister Liz Truss has u-turned on a second significant tax cut, now allowing corporation tax to rise as previously planned next Spring.
It follows a reversal of the abolition of the additional income tax rate at 45%, a tax-cutting measure that also spooked financial markets.
Delivering a news conference at Downing Street, Truss reinstated the planned increase to corporation tax next April from 19% to 25%. Increasing this tax is likely to raise around £18 billion a year.
The Prime Minister remained committed to a “low-tax, high-wage, high-growth economy” but admitted that her mini-Budget last month went “further and faster” than financial markets had anticipated. She said:
“It is clear that parts of our mini-Budget went further and faster than markets were expecting so the way we are delivering our mission right now has to change.”
Despite firing her Chancellor over a little more than a month in office and facing widespread accusations of economic incompetence, the Prime Minister ruled out her own resignation, saying, “I am absolutely determined to see through what I have promised.”
The mini-Budget last month prompted turmoil in the financial markets, with investors losing confidence in the UK. Pound Sterling plummeted against the US Dollar, and the cost of government debt (gilts) surged, with the Bank of England stepping in to stabilise the market.
Kwasi Kwarteng was summoned home from the United States, where he was meeting with finance ministers at the International Monetary Fund annual summit in Washington, and asked to step down as Chancellor of the Exchequer.
The new Chancellor, Jeremy Hunt, has previously served in government as Foreign Secretary and Health Secretary and was a previous Tory leadership contender.
The Prime Minister praised her new Chancellor, saying he is “one of the most experienced and widely respected government ministers and parliamentarians”, who shares her “convictions and ambitions” for the UK.