A review next April of recently deposed Chancellor Kwasi Kwarteng’s £90 billion support for UK homes faced with drastically higher energy bills was signalled today by his replacement Jeremy Hunt.
Closer targetting of more vulnerable energy consumers six months into the subsidy’s operation, yielding a ‘significant’ cut in public spending, were among goals cited for the move by the new Chancellor.
Capping the average home’s energy outlay at around £2,500 a year with the Energy Price Guarantee had been estimated to add around £ 90 billion to public spending. It had been scheduled to run for two years.
Supporting enterprises and the public sector similarly with the Energy Bill Relief Scheme is costed at around £60 billion from the public purse. It was provisionally announced by energy secretary Jacob Rees-Mogg last week as lasting six months.
Hunt today included his partial withdrawal of the government’s energy support promises among a comprehensive reversal of measures presented by Kwarteng in his now notorious 23 September ‘mini’-budget.
In an emergency statement this morning designed to re-assure jittery bond markets, Chancellor Hunt outlined his discarding of most of Kwarteng’s initiatives – including jettisoning indefinitely a planned cut in income tax to 19 pence in the pound. He was also addressing the Commons this afternoon.
Among other measures lost in retreat from Kwarteng’s unfunded slate, a 1.25 percentage point cut in dividend tax planned for April has been ditched.
Plans to ease IR35 rules for the self-employed have been dropped, overseas tourists will now not benefit from an intended VAT-free shopping initiative, and a freezing of duty on alcohol due to come into effect next February has also been scrapped.
Hunt’s statement this morning appeared to have steadied at least partially government debt prices. Interest rates on 30 year gilts dropped by over 0.40 percentage points in reaction, to 4.37 per cent.
The drop reflected a reversal of much of Friday’s haehmorrgahing of confidence in UK government debt, when investors decided prime minister Liz Truss had not gone far enough by sacking Kwarteng and ditching an £18bn corporation tax cut.
That said, the Financial Times reported today that thirty-year government borrowing costs remain far above the level of about 3.75 per cent seen before last month’s £45bn of unfunded tax cuts from Kwarteng and Truss sent markets into a tailspin, triggering a liquidity crisis for UK pension funds.
Hunt, a former health secretary, has held the Chancellorship since Friday, when PM Liz Truss reportedly offered him the post an hour before its holder Kwarteng touched down at Heathrow, having left the IMF’s annual summit in New York a day early.