Almost everything starts at the beginning in London: A few weeks after the presentation of the government's plans for crisis management, there is not much left of it. Finance Minister Hunt is now also shortening the duration of the energy price brake and dropping further tax breaks.
Prime Minister Liz Truss's government is withdrawing most of its recently announced tax breaks to deal with the country's financial chaos. In addition, the term of the state energy price cap is to be shortened, as the new Finance Minister Jeremy Hunt announced in a statement on the country's budget that was scheduled at short notice.
"The most important goal for our country now is stability," said the Chancellor of the Exchequer. The state energy price cap was intended for a period of two years. Now it is to be limited to a period of six months for the time being. The conservative government also announced at the end of September that it would lower the basic income tax rate from 20 to 19 percent, collect a previously planned increase in corporate tax and grant further tax breaks. All of that is now dropped. Hunt also announced tax changes that would bring the state an additional £32 billion (€37 billion) a year.
The reason for the 180-degree turnaround is that the financial markets went crazy after the announcement of massive tax breaks without a counter-financing plan. Investor confidence in the UK government appeared to have been completely lost. The pound plummeted against the US dollar. The Bank of England had to intervene several times and buy government bonds. Rising interest rates on home loans exacerbated the cost of living crisis for many homeowners.
On Friday, Truss fired her previous finance minister, Kwasi Kwarteng, announced a partial departure from her tax policy and appointed Hunt. Now she followed suit. Kwarteng counts as a pawn sacrifice to save Truss. However, it is questionable whether Truss can still save her office. In particular, the capping of energy prices for households and companies was considered their most important political project. The fact that she now has to backtrack here is considered an admission of a total failure.
