LONDON (Reuters) – Britain’s new Chancellor of the Exchequer Jeremy Hunt announced on Monday a near-complete turnaround in Prime Minister Liz Truss’ plan to boost economic growth through unfunded tax cuts, prompting international investors to withdraw.
Here are some of the policy drawbacks Hunt announced, which he said would raise 32 billion pounds ($36.19 billion) in government finances.
Truss plans to lower the base rate of income tax to 19% from 20% in April 2023, one year earlier than expected. Hunt announced that this will now remain at 20% indefinitely.
The Ministry of Finance said that this would raise about six billion pounds annually.
The government will no longer continue with its plan to remove the highest rate of income tax.
Support for energy bills
Hunt said the government’s support for home and commercial energy bills will continue through April of next year, with a review to consider the subsidy required after that point.
Britain will now go ahead with its original plan to raise the corporate tax rate from 19% – the lowest rate among the group of wealthy G7 nations – to 25% in 2023. Truss had planned to keep it at 19%.
The Ministry of Finance had estimated that keeping the rate at 19% would cost the taxpayer 67.5 billion pounds over the next five years.
Hunt reversed a plan to cut the dividend tax rate by 1.25 percentage points from next year, which was estimated at about 1 billion pounds annually.
(dollar = 0.8842 pounds)