Trussonomics is dead

When Jeremy Hunt took the role of chancellor last week, he was thought to have done it under instructions from Liz Truss that he was not to roll back any more of the mini-Budget. That instruction hasn’t stuck. Today’s update on the ‘medium-term fiscal statement’ was not so much a detailed plan to balance the books (that’s still to come on 31 October), but rather a reversal of almost all of the mini-Budget rolled out by Liz Truss and former chancellor Kwasi Kwarteng last month.

The plan to bring forward a 1p cut to the basic rate of income tax has been scrapped completely. It was thought that Hunt would return to the timeline Boris Johnson’s government had originally laid out, to come in from 2024. But the plans to cut have been suspended ‘indefinitely’ as Hunt insisted that while he agreed with the principle that taxpayers should keep more of what they earn, it was ‘not right to borrow to fund this tax cut.’

The VAT cut for foreign visitors is also in the bin, as are freezes to alcohol duty; and plans to change IR35 rules for employers and freelancers have also been U-turned. What remains of the original mini-Budget is now a very short list, albeit one of the most expensive tax cuts remains in place. The National Insurance levy designed for health and social care is still being phased out come November, which was estimated to bring in roughly £18 billion over the next three years. And Hunt has kept the uplift in stamp duty thresholds, which came into effect immediately after Kwarteng’s announcement last month.

But one of the biggest announcements today relates to plans announced almost two weeks before the mini-Budget: the energy price guarantee, which was billed as the largest support package in peacetime, estimated to cost between £80 billion and £150 billion for households alone. The current policy, which caps the unit price of energy for everyone (regardless of income or wealth) will stay in place until next April, but from there a Treasury-led review will update the policy to be more targeted, in a bid to stop ‘exposing public finances to unlimited volatility in international gas prices’, while still ‘ensuring enough support for those in need.’

Hunt suggested there are far more brutal decisions to come. ‘There will be more difficult decisions, I'm afraid, on tax and spend,’ he said. ‘All departments will need to redouble their efforts to find savings, and some areas of spending will need to be cut.’ This suggests that Truss and Kwarteng’s repeated promises to protect NHS and defence spending may even be up for review.

His main focus, he insisted, was to regain ‘stability’. The Treasury estimates that today's announcements account for £32 billion worth of revenue. Hunt emphasised this in his update, which was clearly a direct message to markets: that the majority of the unfunded tax cuts are now reversed.

As expected, this new agenda has come at the expense of the old one. But the extent to which Trussonomics has been rolled back – especially the abolition of the basic rate tax cut – is both surprising and unprecedented. And there is plenty more to come.