Ruthless Jeremy Hunt axes Liz Truss’s tax cut reform

British Chancellor Jeremy Hunt has reversed nearly every aspect of Liz Truss’s economic plan, in an extraordinary economic statement that was brought forward to calm the markets.

British Chancellor Jeremy Hunt. Picture: Getty Images

British Chancellor Jeremy Hunt has reversed nearly every aspect of Prime Minister Liz Truss’s economic plan, in an extraordinary economic statement on Monday that was brought forward to calm the markets.

The tax-cutting, low government approach by Ms Truss – supported by most Tory MPs when they elected her leader – has been abandoned as Mr Hunt dumped the recently announced tax cuts.

Everything has been axed, ­except a stamp duty saving and a National Insurance contribution reduction because the measures are part-way through parliament.

On a dramatic move that was not foreseen, Mr Hunt also put a limit on the government’s energy support to households, which had meant the average two-bed house would have an annual gas and electricity bill of £2500 a year. He said this energy package would apply only until next April.

Energy analysts believe the price of energy, which has already doubled from last year despite the government-subsidised scheme, could double again. “It would not be responsible to expose public fin­ances to the volatility of gas prices,” Mr Hunt said.

He announced a review of how to support household energy costs beyond April next year that would put less burden on the ­taxpayer.

Mr Hunt has ripped up plans to reduce the basic rate of tax to 19 per cent, abolished a health and social care levy, and will no longer implement dividend and payroll reforms. “Basic rate of tax will remain at 20 per cent until economic circumstances allow it to be cut,’’ he said.

While the raft of emergency moves appeared to settle the immediate concern of the markets as to how the government would have funded Ms Truss’s big tax cuts, it has barely restored any faith in her leadership.

Just weeks after she had made clear her bold low-tax plan to stimulate growth, winning the leadership race after the party turfed out Boris Johnson, Ms Truss is now considered a prime minister in name only.

Mr Hunt said both he and Ms Truss were committed to cutting businesses taxes, but confirmed that the move to cut corporation tax from 25 per cent to 19 per cent, would not take place.

He also said the government faced “more difficult decisions” on both tax and spending to get government debt falling over the medium term.

“The UK will always pay its way, and will take tough decisions to do so,” Mr Hunt said.

Sir Graham Brady, chairman of the 1922 Committee, will only act if a significant number of MPs call for Ms Truss to quit. Picture: Times

He said the most important object was stability. “The government cannot eliminate volatility in the markets but they can play their part,’’ he said.

Ms Truss was due to appeal to moderate Tory MPs to save her premiership overnight after it emerged that powerbrokers had held secret discussions about ousting her and arranging a ­“coronation”.

Ms Truss was to address the One Nation group of centrist Conservatives after a weekend in which three of her MPs called on her to quit.

Senior members of the 1922 Committee of Conservative backbenchers held talks late on Friday evening about Ms Truss’s future.

The discussion focused on the circumstances in which committee chairman Graham Brady would have to tell Ms Truss to stand aside, even though under present rules she cannot be challenged for 11 months. Sir Graham returned from a holiday in Greece on Sunday and was expected to meet Ms Truss on Monday.

Rishi Sunak, with his daughter, is seen as a potential unity candidate. Picture: AFP

Ms Truss was due to address the 100-strong One Nation caucus on Monday night in an effort to win round MPs, many of whom feel excluded from a government packed with her supporters.

Her speech to the parliamentary party last week was dis­astrous, and exacerbated discontent with her leadership.

In an incendiary intervention on Sunday, a senior ally of Ms Truss accused “plotters” of working against “the British people” by fuelling turmoil in the markets.

“The whole Conservative Party owes it to the British people to focus entirely on them and their needs,” they said.

“It is time the plotters thought about who they work for: it is the British people. Those plotting against the government should remember that markets respond to political instability. The plotters will not get a coronation.

“Those wanting to run a rerun of the summer contest will simply bring about an early general ­election.”

Many Conservative MPs see Ms Truss’s departure as increasingly inevitable.

MPs present questioned the point of Ms Truss staying in office, given that many of the policies she campaigned on during the leadership contest have now been abandoned.

Additional reporting: The Times