British Chancellor of the Exchequer Jeremy Hunt has reversed most of an economic package announced by the government just weeks ago, saying the country needed to rebuild investor confidence.
Hunt said on Monday he was scrapping “almost all” the tax cuts announced last month and signalled public spending cuts were on the way.
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Hunt said a planned 1 percentage point cut to the basic rate of income tax that had been due to take effect next year will not happen.
He also scaled back a cap on energy prices designed to help households pay their bills. It will now be reviewed in April rather than lasting two years.
“I remain extremely confident about the UK’s long-term economic prospects as we deliver our mission to go for growth,” Hunt said in a televised clip. “But growth requires confidence and stability, and the United Kingdom will always pay its way.”
Hunt was appointed on Friday after Prime Minister Liz Truss fired Kwasi Kwarteng, who spent less than six weeks in the Treasury job.
Truss and Kwarteng jointly came up with a September 23 announcement of 45 billion pounds ($50bn) in unfunded tax cuts that spooked financial markets, sent the pound to record lows and forced the Bank of England to take emergency action.
Monday’s hastily scheduled announcement came two weeks before Hunt is due to set out a medium-term fiscal plan on October 31.
Al Jazeera’s Jonah Hull, reporting from London, said the U-turn on the energy price guarantee was Monday’s biggest announcement.
“The reason this is so toxic for Liz Truss is because that has been the measure she had fallen back amid all the criticism of the government’s budget,” he said.
“Junking that measure on top of everything else it would only add to Liz Truss’s problems, but good and comforting words for the markets.”
Later on Monday, Hunt told Conservative lawmakers that Truss had fully backed him in making “difficult decisions”.
“The chancellor emphasised the need for stability and said that the PM should be commended for changing tack in the face of the deteriorating global economic situation,” a statement issued by Truss’s office said after Hunt met with lawmakers in private.
“He said that the PM had backed him to the hilt in making the difficult decisions of which there are more to come.”
Sterling extended its gains against the US dollar, to be up 1.2 percent at 11:20am (10:20 GMT), and government bond prices edged higher.
The near-total reversal of the economic plan leaves Truss, Britain’s fourth prime minister in six years, battling to survive in Downing Street less than six weeks after she came to power promising bold tax cuts and deregulation to reignite economic growth.
She has been forced to reverse course after markets reacted violently to her plan, hammering the value of the pound and government bond prices and forcing the Bank of England to intervene to protect pension funds.
The central bank stuck to its schedule of ending the support on Friday, adding to the pressure on Hunt over the weekend to find ways to reduce spending before the bond markets reopened.
While he had been expected to reverse some of the tax cuts, the change to the energy support scheme had been unexpected.