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20 October 2022

Was Liz Truss’s mini-Budget the point of no return?

More than £30bn of the £45bn of tax cuts originally announced were quickly abandoned. Less than a week later, Truss announced her resignation.

By Katharine Swindells

Earlier this month, in an effort to calm the markets and prevent her eventual downfall, Liz Truss sacked Kwasi Kwarteng as chancellor and replaced him with Jeremy Hunt. A few days later, Hunt announced a series of dramatic U-turns on economic policy.

The new chancellor revealed that the government would abandon most of the measures from the “mini-Budget” set out by Kwarteng the previous month, including the proposed cut in the basic rate of income tax, the cut to dividends tax, the repeal of the off-payroll working rules, and the proposed new VAT-free shopping scheme. He also announced that the government’s energy support scheme would be scaled back from next April.

Hunt’s revisions followed the other U-turns that Truss and Kwarteng had already announced: the retention of the 45p income tax rate and a rise in corporation tax from 19 per cent to 25 per cent, which by 2027 will raise more than £18.7bn per year.

Before long, the government had reversed more than £32bn of its initial proposed tax cuts of £45bn. Among the measures that have survived are the reversal of the National Insurance increase (projected to cost the government around £18bn per year) and the cut in stamp duty, though it remains to be seen what policies are left standing once a new PM is in post.

[See also: Liz Truss resigns as Prime Minister after just 44 days]

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