Britain’s new Chancellor of the Exchequer, Jeremy Hunt, on Monday reversed almost all of Prime Minister Liz Truss’s mini-budget that had caused market jitters and halted a broad energy subsidy plan, saying the country needed to rebuild confidence of the investors.
Hunt, appointed on Friday to fix the public finances after Truss’s economic plan hammered the value of British assets, said the country needed to build confidence and stability before it could try to grow the economy.
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He said the changes to the planned tax cuts would add 32 billion pounds ($36 billion) each year. Government spending will also need to be cut to plug a hole in the public finances that the Sunday Times reported was 72 billion pounds (US$81 billion).
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“I am very confident about the UK’s long-term economic prospects as we deliver on our mission to grow,” he said in a televised clip. “But growth requires confidence and stability, and the UK will always pay its way.”
Sterling extended its gains against the dollar, rising 1.2% at 11:20 a.m. (1020 GMT), and government bond prices rose slightly.
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The near-total reversal of the economic plan leaves Truss, Britain’s fourth prime minister in six years, struggling to survive in Downing Street less than six weeks after coming to power promising bold tax cuts and deregulation to revive economic growth.
She has been forced to reverse course after markets reacted violently to her plan, hitting the value of the pound and government bond prices and forcing the Bank of England to step in to protect pension funds.
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The Bank stuck to its timetable for ending support on Friday, adding to pressure on Hunt over the weekend to find ways to cut spending before bond markets reopen.
While he was expected to reverse some of the tax cuts, the switch to the energy support plan had been unexpected.
Truss had announced a two-year subsidy plan to support households and businesses during the period of rising energy prices, costing £60bn in six months. Hunt said Monday that the plan would now run until April, but after that it would become more targeted and limited.
Hunt will still deliver a more comprehensive medium-term fiscal plan as planned on Oct. 31, along with forecasts from the independent Office for Budget Responsibility, the Treasury said.