Hunt confirms energy price guarantee will only last in its current form until April
Hunt confirms that the energy price guarantee, as originally announced, will only last until April.
He says Liz Truss agreed that it would be wrong to make such a long-term spending commitment, when it is unclear what will happen to energy prices in the future.
He says there will then be a review. A more targeted system will then be put in place, he says.
This is the big surprise in today’s announcement. It will probably go down well with the markets. But this cuts the knees from under Liz Truss. The only policy that she had left that she was able to take credit for – see 11.04am – has now gone into the shredder. There is nothing left of the Truss agenda at all.
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Nadine Dorries, the former culture secretary and Boris Johnson supporter, says that if Tory MPs cannot support Liz Truss, they should make Johnson PM again, or hold a general election.
There is no unity candidate.
No one has enough support.
Only one MP has a mandate from party members and from the British public – a mandate with an 80 seat majority.@BorisJohnson
The choices are simple – back Liz, if not bring back Boris or face a GE within weeks.
— Nadine Dorries (@NadineDorries) October 17, 2022
The energy price guarantee U-turn is not just embarrassing for Liz Truss. (See 11.04am.) This is what Jake Berry, the Conservative party chair, tweeted just yesterday.
Liz Truss held a political cabinet conference call this morning. (See 11.27am.) In a readout of what was said, her press secretary said that Jeremy Hunt, the chancellor, blamed the global situation for the need for U-turns. The press secretary said:
The chancellor set out the worsening global economic situation, with interest rates rising around the world as monetary policy returns to a sense of normality. Because of this, the government is adjusting its programme while remaining committed to long term reforms to improve growth such as investment zones and speeding up infrastructure projects.
Sky’s Beth Rigby argues this is a mistake, because it implies that No 10 is still not accepting that its original mini-budget triggered the crisis. But on Friday Liz Truss did acknowledge that the mini-budget was a factor, saying it went “further and faster than markets were expecting”.
Political journalists are arguing that, while the mini-budget U-turns announced by Jeremy Hunt this morning may have reassured the financial markets, they may have made Liz Truss’s position even more impossible. Here are four takes.
From Sky’s Beth Rigby
Digesting the Hunt announcement. This now a PM without political support or a policy platform. How do you remain Prime Minister in that situation?
— Beth Rigby (@BethRigby) October 17, 2022
From the Times’ Henry Zeffman
From my colleague Peter Walker
That Jeremy Hunt statement was, basically, a very polite coup. He might as well have delivered it after disembarking from a Chinook in the No 10 garden. Liz Truss is no longer the prime minister.
— Peter Walker (@peterwalker99) October 17, 2022
From Sky’s Sam Coates
These are from Faisal Islam, the BBC’s economics editor, on the proposed review of the energy price guarantee. (See 11.32am.)
The energy policy shift unhooks UK borrowing from the wholesale gas price after April…
The consequence is that we now do not know how many people will face no help on their energy bill – ie face £4000 plus bills for typical usage….
— Faisal Islam (@faisalislam) October 17, 2022
This seems very important:
Hunt: “And the new approach will better incentivise energy efficiency.”
That would suggest a German style subsidy only for a proportion of the bill, and full prices for the rest, incentivizing lower usage.
— Faisal Islam (@faisalislam) October 17, 2022
One measure has survived the mini-budget, the FT’s George Parker points out.
Apart from the NICs and stamp duty cut, the abolition of the bankers’ bonus cap has survived the Hunt apocalypse
— George Parker (@GeorgeWParker) October 17, 2022
But abolishing the cap on bankers’ bonuses was not a tax cut (although it may have felt that way to some bankers). The Treasury said that getting rid of the cap would promote growth, at no cost to the taxpayer.
Angela Richardson has become the fourth Tory MP to publicly call for Liz Truss’s resignation. The Guildford MP told Times Radio this morning:
We saw those unfunded tax cuts. Had that not happened, the markets would not have responded in the way that they did … And I believe that’s 100% down to the prime minister, I’m afraid. And so I just don’t think that it’s tenable that she can stay in her position any longer. And I’m very sad to have to say that.
Markets remain upbeat as Hunt ditches mini-budget tax cuts
Investors are welcoming Jeremy Hunt’s decision to ditch most of the mini-budget, and rein in the costs of the energy price cap, my colleague Graeme Wearden writes on his business live blog. Graeme says:
The pound is holding its earlier gains, still up around one cent at $1.127.
And UK bonds are on track for one of their best days in decades, as Jeremy Hunt scrapped most of the unfunded tax cuts that had undermined confidence in the UK.
The yields on the 30-year gilt dropped by nearly 40 basis points to 4.385%, marking one of its biggest daily drops on record, Reuters reports.
Bond prices had already strengthened sharply before Hunt took to the air, particularly following reports that the energy cap was being cut back.
And these are from Newsnight’s Ben Chu.
There is more on the business live blog.
Treasury explains how seven mini-budget U-turns will raise £32bn
Here is the Treasury news release with details of the mini-budget rewrite announced by Jeremy Hunt at 11am. Arguably this is one of the biggest tax-raising announcements in Treasury history, raising £32bn by 2026-27, although most of these tax increases are simply reversals of tax cuts that were never implemented anyway.
The table also shows that there have now been seven mini-budget U-turns.
This Treasury chart sets out how much will be raised by each of the U-turns.
Guardian Live are holding a panel discussion tonight on the subject of whether Liz Truss can survive. It starts at 8pm and it will feature Randeep Ramesh, the Guardian’s chief leader writer; Aditya Chakrabortty, Guardian columnist and senior economics commentator; Carys Roberts, executive director, IPPR; and Gaby Hinsliff, Guardian columnist. They will be discussing Truss’s plight and taking questions. You can book tickets here.
Labour claims government U-turn on fuel bills freeze makes case for new windfall tax on energy companies even stronger
Labour says the energy price guarantee U-turn makes it even harder to understand why the government won’t back its plan for a new windfall tax on energy companies. These are from Rachel Reeves, the shadow chancellor.
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
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. 2/3
— Rachel Reeves (@RachelReevesMP) October 17, 2022
The change on their energy plan begs the question yet again – why won’t they bring in a windfall tax on energy producers to help foot the bill?
Only Labour offers the leadership and ideas Britain needs to fix the economy and get out of this mess. 3/3
— Rachel Reeves (@RachelReevesMP) October 17, 2022
Hunt says ‘some areas’ of public spending will have to be cut
In his statement Jeremy Hunt also confirmed that public spending would be cut in “some areas”. He said:
There will be more difficult decisions, I’m afraid, on both tax and spending as we deliver our commitment to get debt falling as a share of the economy over the medium term.
All departments will need to redouble their efforts to find savings and some areas of spending will need to be cut.
But as I promised at the weekend, our priority in making the difficult decisions that lie ahead will always be the most vulnerable and I remain extremely confident about the UK’s long-term economic prospects as we deliver our mission to go for growth.
What Jeremy Hunt said about how energy price guarantee will become more targeted and less expensive from April
This is what Jeremy Hunt said in his statement about the energy price guarantee.
The biggest single expense in the growth plan was the energy price guarantee.
This is a landmark policy supporting millions of people through a difficult winter, and today I want to confirm that the support we are providing between now and April next year will not change.
But beyond that, the prime minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.
So I’m announcing today a Treasury-led review into how we support energy bills beyond April next year. The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.
Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency.
Liz Truss held a political cabinet call at 10am to discuss the decision to scrap the mini-budget measures, PA Media reports. PA says:
The chancellor set out the “worsening global economic situation, with interest rates rising around the world as monetary policy returns to a sense of normality”, a No 10 source said.
“Because of this, the government is adjusting its programme while remaining committed to long-term reforms to improve growth such as investment zones and speeding up infrastructure projects.”
Jeremy Hunt is expected to meet all secretaries of state this week to decide on future spending plans, which will then be submitted to the Office for Budget Responsibility on Friday.
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