Jeremy Hunt made a number of huge announcements during his televised economic statement on Monday (October 17). The newly-appointed Chancellor confirmed a wave of U-turns on policies set out in Kwasi Kwarteng's previous fiscal statements.
The new measures are part of plans to fast-track billions of pounds of savings in an attempt to get the public finances back on track and stabilise financial markets after weeks of turmoil. It follows talks over the weekend between Mr Hunt and Prime Minister Liz Truss on what the Treasury described as measures “to ensure sustainable public finances underpin economic growth”.
Mr Hunt has already warned that taxes will have to rise and public spending will be squeezed to address the black hole in the public finances opened up by former chancellor Kwasi Kwarteng’s £45 billion mini-budget tax giveaway. The pound has strengthened and UK government bonds have rallied further as Mr Hunt announced plans to reverse key policies in the former Chancellor’s mini budget.
Read more: Energy bills help to stop in April and NOT two years in major U-turn
Sterling rebounded by more than 1.2% to 1.139 against the US dollar shortly after Mr Hunt gave his emergency statement to calm the financial markets. Yields on 30-year government bonds, or gilts, eased back further by around 10%, as the new Chancellor set out plans to shave off billions of Government debt.
Here's how the government's financial plan announcements may affect you.
Income tax
Mr Hunt announced that the government will scrap plans to reduce the basic rate of income tax from 20% to 19% in April next year. The basic rate of income tax will remain at 20p indefinitely, Chancellor Jeremy Hunt said.
The rate had been due to reduce to 19p from April under Kwasi Kwarteng’s mini-budget, a year earlier than Rishi Sunak had planned. Mr Hunt said it would now stay at 20p until economic conditions allowed a reduction.
He added: “It is a deeply held Conservative value – a value that I share – that people should keep more of the money that they earn. But at a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut.”
The reduction would have meant a tax cut for more than 31 million people - but this will no longer be the case.
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Energy Bills
Help with energy bills for all households will only last until April, with Jeremy Hunt announcing a review to look at a “new approach” to target support at those worst off after that.
The Energy Price Guarantee, which was announced in Kwasi Kwarteng's mini-budget in September, set out to ensure that a typical household in Great Britain paid around £2,500 a year on their energy bill. It was meant to last for the next two years, starting from October 2022.
Ending the support for households early could mean that many will continue to struggle to pay their energy bills in winter 2022 - but it will depend on what other packages are ushered in as part of the government's "new approach" to helping with the crisis.
Mr Hunt said the new approach will “cost the taxpayer significantly less”.
Alcohol Duty
The government will no longer freeze alcohol duty rates from 1 February 2023 for a year. But the next steps of the Alcohol Duty Review announced in Growth Plan 2022 will continue as planned.
The freeze being scrapped means that consumers will have to pay more for their booze. Brits will be forking out around 7p more, on average, for a pint of beer. A pint of cider will go up by around 4p, a bottle of wine 38p and a bottle of spirits £1.35.
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