Jeremy Hunt’s economic plan turns the clock back to austerity
An economic Suez. For once, comparisons with the humiliation suffered by Sir Anthony Eden’s government in 1956 are appropriate because within 72 hours of becoming chancellor, Jeremy Hunt has abandoned not just most of Kwasi Kwarteng’s planned tax cuts but the government’s entire growth strategy.
Eden was gone within a couple of months of sending UK forces into Egypt to retake the Suez canal and then being forced to pull them out again in the face of the threat of US action to undermine sterling.
Even though Hunt’s tax rises have bought the prime minister some breathing space, Liz Truss’s capitulation to the forces of orthodoxy – the International Monetary Fund, the Treasury and the financial markets – has been just as complete. She will be lucky to avoid repeating Eden’s fate despite the breathing space Hunt’s tax increases have bought her.
Of the original package, only the reversal of the national insurance contributions increase and the cut in stamp duty have been spared Hunt’s axe. The cut in the basic rate of income tax has been shelved indefinitely. A freeze in alcohol duties from February now won’t go ahead. Nor will the cut in the tax on dividends or changes to the tax rules for the self-employed.
These changes – with last week’s announcement that corporation tax would, after all, go back up from 19% to 25% from next April and the U-turn earlier this month on abolishing the 45p top rate of income tax – will save the Treasury £32bn. The original package would have cost £45bn.
Just in case that wasn’t enough to mollify the financial markets, Hunt also scrapped the government’s commitment to a blanket two-year energy price cap. The pledge will now last only until next April, after which help will be targeted on the most
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