New UK Finance Minister Tears Up Truss’ Economic Plan

Britain’s new finance minister has revealed a detailed reversal of the UK government’s tax-and-spending plans in a last-ditch effort to calm skittish markets and restore the government’s credibility.

After just four days in the role, Jeremy Hunt announced he would scrap “almost all” tax measures announced a mere three weeks ago by his predecessor. The embarrassing U-turn was set to save the country £32 billion. “A central responsibility for any government is to do what’s necessary for economic stability,” Hunt explained.

A proposed cut to the basic rate of income tax from April 2023 has been postponed “indefinitely.” The rate would, therefore. remain at 20% until further notice. While the government has said it will still guarantee energy prices for households and businesses through this winter, it now won’t commit to capping prices beyond next spring, as had been previously promised.

The UK’s treasury plans to lead a review to examine how to reduce the pain of high energy costs beyond April 2023, though its guarantees will remain in place over the next six months.

The announcement helped ease alarm in financial markets. UK government bonds rallied. Yields on 30-year UK bonds, which move in the opposite direction to prices, dropped to 4.37% after rising above 5% last week. At the same time, 10-year borrowing costs fell below 4 and the pound gained 1.2% to $1.13. This will provide crucial clues to FOREX traders everywhere on how well currencies respond to sound fiscal management.