market rebuke

As the U-turn goes, it was dramatic. Jeremy Hunt, the new British Chancellor of the Exchequer, on Monday literally scrapped almost all mini-budget proposals put forward by his predecessor, Kwasi Quarteng, who have left financial markets in turmoil. Most importantly, a controversial scheme to cut the basic income tax rate, which is seen as a gift to the rich, has been put on hold indefinitely. Other planned reductions in dividend taxes, off-payroll job changes, a new value-added tax-free shopping plan and a moratorium on certain alcohol charges have also been removed. Furthermore, in an effort to slash spending and boost revenue, Hunt said the government’s plan to cap energy prices for two years would only work until April and targeted poor households after that. These steps, he said, are aimed at instilling “confidence and stability”. This came as a relief to investors whom he saw as financially negligent in the current context. It was also a victory for the markets, particularly the market for government bonds, whose thumbs-down enraged the ruling-party and forced this reversal amid a whisper of moves to replace Prime Minister Liz Truss. He may have changed finance ministers, but the fact that the earlier proposals were part of his economic agenda may upset his leadership. After Brexit, the wonders of which were largely sold off by Britain’s ruling Conservative Party, the country could hardly tolerate errors of policy. An ideological scramble for less taxation at the wrong time prompted a belief similar to “fairy tales”, the sage Sunak warned against.