The Daily Telegraph

Triple lock could be next policy to go as Hunt stokes mini-budget bonfire

Focus is on compassion­ate conservati­sm, says new Chancellor as he raises billions with tax reversals

- By Daniel Martin and Tim Wallace

‘Every move will be shaped through compassion­ate conservati­ve values that will prioritise the needs of the vulnerable’

THE basic rate of income tax will remain at 20p indefinite­ly, Jeremy Hunt announced yesterday as he tore up the mini-budget delivered by Kwasi Kwarteng a month ago.

The new Chancellor announced about-turns on his predecesso­r’s decision to lower dividend tax and to reform the way the self-employed are taxed.

He also warned MPS that there would be “decisions of eye-watering difficulty” to come, whether that be increased taxes or reduced spending. But he pledged that all decisions would be within the principles of “compassion­ate conservati­sm”.

Mr Hunt also suggested that he could bring in a windfall tax on energy firms – something that Liz Truss and Mr Kwarteng had vehemently opposed.

He hinted that the pensions triple lock, under which pensions rise by the highest of inflation, earnings or 2.5 per cent, would also be reconsider­ed.

Yesterday morning at 11.10, Mr Hunt released a filmed statement from the Treasury to unveil his changes to Mr Kwarteng’s mini-budget. In the afternoon, he faced MPS with Liz Truss sitting alongside him.

His major announceme­nt was to overturn the previous chancellor’s decision to cut the basic rate of income tax from 20 per cent to 19 per cent in April next year. It was designed to show that normal workers were benefittin­g from lower taxes, and was a deliberate advancemen­t of Rishi Sunak’s plan to make the move 12 months later.

But now this has been cancelled, the Government is on the back foot. Mr Hunt did not just shift back to Mr Sunak’s planned date, but eradicated the cut altogether. He said the basic rate would remain at 20 per cent “indefinite­ly, until economic circumstan­ces allow for it to be cut”.

This is worth £5.3billion to the public purse next year, and will cost the typical worker £130 annually.

Mr Hunt also said the price of a pint would rise by 7p as the alcohol duty freeze was ditched. Instead, it will rise along with inflation next February.

Another change was that tourists will no longer benefit from the return of taxfree shopping in Britain; a move which will save £2billion. Mr Kwarteng had opened a consultati­on into introducin­g such a scheme, saying he wanted shopping centres and airports to “feel the economic benefit” of the millions of tourists coming to the UK.

Mr Hunt also scrapped plans to repeal controvers­ial reforms about the way tax is calculated for the selfemploy­ed. The Chancellor said he would not reverse the “off-payroll IR35 reforms”, as Mr Kwarteng had planned.

The rules, which came into force in 2017, ban contractor­s who work for a

‘This Government will take the difficult decisions necessary to ensure there is trust and confidence in our national finances’

‘You have to be very careful that you don’t tax companies in a way that drives away investment’

single employer from being treated as a business for tax purposes. Instead, the worker is taxed as an employee and is subject to income tax instead of corporatio­n tax. The rules also place responsibi­lity for assessing whether a contractor is self-employed or employed with the business, many of which just stopped hiring contractor­s.

The cut to dividend tax was also reversed, reinstatin­g Mr Sunak’s increase in the rate levied on payouts.

Dividend tax rates increased by 1.25 percentage points in April, matching the increase in employees’ National Insurance, which has since been reversed. Basic-rate income tax payers will continue to pay 8.75 per cent on dividends instead of 7.5 per cent. Higher-rate payers will be charged 33.75 per cent, from 32.5 per cent. Toprate payers – those who earn more than £150,000 a year – will now pay 39.35 per cent, instead of 32.5 per cent.

On the pensions triple lock, he said he was “aware of how many vulnerable pensioners there are and the importance of the triple lock”. But added that he is “not making any commitment­s on any individual policy areas”.

The only policies to survive Mr Hunt’s mini-budget bonfire in their original form are the cuts to stamp duty, which now kicks in on homes bought for more than £250,000 rather than £125,000, and National Insurance, as well as some minor business tax cuts.

These measures will cost the Treasury around £18billion a year in lost revenues, compared with the mini-budget’s total tax cuts of £45billion. Bankers will also get to keep their higher bonuses and the Government still plans to push ahead with creating low-tax investment zones, although neither of these was included in the costings for Mr Kwarteng’s fiscal plans.

Unveiling his changes to MPS, Mr Hunt said: “The central responsibi­lity of any government is to do what is necessary for economic growth.

“We are a country that funds our promises and pays our debts and when that is questioned, as it has been, this Government will take the difficult decisions necessary to ensure there is trust and confidence in our national finances.

“That means decisions of eye-watering difficulty. But I give the house and the public this assurance, every one of those decisions, whether reductions in spending or increases in tax, will be shaped through core compassion­ate conservati­ve values that will prioritise the needs of the most vulnerable.”

The Chancellor announced the establishm­ent of an economic advisory council, comprising independen­t figures such as Rupert Harrison, George Osborne’s former chief of staff; and Karen Ward from JP Morgan.

He was also careful to reinstate the commitment of “the whole Government” to being independen­t of the Bank and the Office of Budget Responsibi­lity, something that had been called into question in recent years.

Rachel Reeves, the shadow chancellor, castigated the about-turns. She said the Tories were “spiralling down the political plughole”, adding: “The damage has been done. This is a Tory crisis made in Downing Street, and ordinary working people are paying the price.”

But John Redwood, who supported Mr Kwarteng’s original budget, asked: “What will the impact of these measures be on the growth rate and will we will avoid a recession?”

Mr Hunt appeared to cast doubt on the future of the Government’s fracking programme, saying it would only proceed with public support.

He also said he was “not against the principle” of windfall tax.

But, Mr Hunt then added: “You have to be very careful that you don’t tax companies in a way that drives away investment. We have said that nothing is off the table.”

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 ?? ?? Jeremy Hunt, the new Chancellor, took some exercise yesterday morning before announcing the changes to the mini-budget, below
Jeremy Hunt, the new Chancellor, took some exercise yesterday morning before announcing the changes to the mini-budget, below
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