Chancellor reverses almost all of mini-budget tax cuts

It follows a meeting that took place at the prime minister’s out-of-London residence Chequers between Hunt and Liz Truss. Off the back of this, it was decided a number of tax policies will no longer go ahead. 

This includes the planned cut to the basic rate of income tax down to 19%, meaning it will remain at 20% indefinitely. A cut in dividends tax will also not go ahead, which means the 1.25 percentage points increase will remain in place. 

Additionally, reforms to the off-payroll working rules will remain in place, while the introduction of a new VAT-free shopping scheme for non-UK visitors and a freeze on alcohol duty rates will not go ahead as planned. 

This follows from the previously announced decisions not to proceed with proposals to remove the additional rate of income tax and to cancel the planned increase in the corporation tax rate. Taken together, these changes are estimated to be worth around £32bn a year. 

However, the government’s reversal of the National Insurance increase and the Health Social Care Levy, as well as the cuts to Stamp Duty Land Tax, will remain. 

The Energy Bill Relief Scheme, which has capped most energy prices at £2,500, will remain in place from now until April next year - dropping from the two years it was originally going to last. 

Looking beyond April 2023, the prime minister and chancellor have agreed it would be “irresponsible” for the government to continue exposing public finance to the “unlimited volatility” in international gas prices. 

There will, therefore, be a treasury-led review launched to consider how to support households and businesses after April 2023. The objective of this review is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough for those in need. 

In response to the statement, shadow chancellor Rachel Reeves tweeted: “All the chancellor’s statement underlines is that the damage has been done.

“This is a Tory crisis made in Downing Street, paid by working people with higher mortgages and higher borrowing rates. They’ve lost all credibility. 

“The chancellor said growth requires “confidence and stability”. It is clear the Tories can’t provide this. 

“There will continue to be a huge cost to families because of them. We’re still flying blind with no OBR forecasts and no clarity on the impact of their mistakes.” 

All the Chancellor’s statement underlines is that the damage has been done.

This is a Tory crisis made in Downing Street, paid by working people with higher mortgage and higher borrowing costs.

They’ve lost all credibility. 1/3

— Rachel Reeves (@RachelReevesMP)

All the Chancellor's statement underlines is that the damage has been done.

This is a Tory crisis made in Downing Street, paid by working people with higher mortgage and higher borrowing costs.

They’ve lost all credibility. 1/3

— Rachel Reeves (@RachelReevesMP) October 17, 2022