While the reversal calmed financial markets, it further undermined the prime minister’s crumbling authority and fueled calls for her to step down before her Conservative Party forces her out.
By JILL LAWLESS and DANICA KIRKALONDON — The U.K.’s new Treasury chief ripped up the government’s economic plan on Monday, dramatically reversing most of the tax cuts and spending plans that Prime Minister Liz Truss announced less than a month ago.
Scrapping Truss’ plan to reduce the basic rate of income tax by 1 percentage point, Hunt said “it is a deeply held Conservative value — a value that I share — that people should keep more of the money that they earn.” Hunt was appointed Friday after Truss fired his predecessor Kwasi Kwarteng, who spent less than six weeks in the Treasury job. Truss and Kwarteng jointly came up with a Sept. 23 announcement of 45 billion pounds in unfunded tax cuts that spooked financial markets, sent the pound to record lows and forced the Bank of England to take emergency action.
Hunt’s moves are aimed at restoring the government’s credibility for sound fiscal policy after Truss and Kwarteng rushed out a plan for tax cuts without detailing how they would pay for them. Yields on 10-year government bonds, an indicator of government borrowing costs, fell to 3.947% from 4.327% on Friday. It was 3.495% on Sept. 22. Bond yields tend to rise as the risk of a borrower defaulting increases and fall as that risk declines.
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