In what may be seen as a major dismantling of the Trussonomics, UK’s new Chancellor of Exchequer, Jeremy Hunt, announced major changes to the mini-budget. Barely three days into the job, Hunt made changes to the policies ranging from energy bills to income tax.
The Energy Price Guarantee, which was initially planned for two years, will now be there only for six months to cover the upcoming winter. Hunt said that the most vulnerable people would be supported through new approaches once the review takes place in April. People will also be incentivised to save more energy to cut their bills.
The income tax cut, which had been promised this year by the previous two Chancellors, Rishi Sunak and Kwasi Kwarteng, has been cancelled by Hunt. The income tax rate would not change, staying at 20% indefinitely. In fact, with the soaring cost-of-living crisis, the number of people being dragged into higher income tax bands has been rising due to the thresholds being locked, which will potentially go on. The planned elimination of the 45% additional tax rate to be paid by those with yearly earnings of over £150,000 has already been abolished.
The surging mortgage rates were triggered further due to the mini-budget announcements. Per market experts, there is hardly any likelihood of an immediate fall in mortgage rates. As borrowing becomes more costly, the markets are observing how the Bank of England would tackle the rising mortgage costs by changing interest rates.
People on major benefits like universal credit may see a hike in what they get, but not until April. Hunt claimed that future decisions would be tough, but aid to the weaker ones would be prioritised.
Essentially, mini-budget announcements related to the hike in corporation tax, income tax cut, alcohol duty freeze, and no-taxed shopping for non-UK visitors have been scrapped. However, the announcements related to National Insurance and stamp duty have been retained.