Jeremy Hunt: What does Mr Hunt statement mean for Wales?

By David Deans

BBC Wales political reporter

Jeremy Hunt’s shock emergency statement has reversed almost all of Kwasi Kwarteng’s mini-budget.

It means income tax payers will not get a cut to the basic rate, and universal energy support will end in April.

The new chancellor, appointed last week, said his priority will be to help the most vulnerable.

The Welsh government said the statement showed the “chaos at the heart of the UK government”.

One Labour politician said Liz Truss is now PM “only in title” and accused the Tories of taking a “chainsaw to public services”.

Some measures from the mini-budget – the scrapping of the rise in national insurance and cuts to stamp duty in England – will remain.

Mr Hunt was appointed last Friday after the prime minister sacked Mr Kwarteng, after his mini-budget prompted turmoil in the markets.

Speaking on Monday morning, Mr Hunt said: “No government can control markets – but every government can give certainty about the sustainability of public finances. And that is one of the many factors that influence how markets behave.”

He warned more decisions were to come on tax and cutting spending, with a major statement expected on 31 October.

It is the latest in a line of u-turns, after proposals to scrap the top 45p rate of tax and cancel a rise to corporation tax were dropped.

Cut to the basic rate scrapped

Jeremy Hunt not only scrapped plans to cut the basic rate of tax from 20p in the pound to 19p, but said the 20p rate will remain indefinitely.

It effectively axed both the mini-budget decision to cut it from April next year, and Boris Johnson era-plans to cut it from 2024.

Wales has 1,290,000 people who pay the basic rate of tax, which is paid between the first £12,571 and £50,270 of earnings.

The cut was to be worth £170 per year to taxpayers.

The decision will ease pressure on the Welsh government which had been facing calls to keep the basic rate at 20p. Such a measure had not been ruled out by Welsh Labour ministers.

Energy price guarantee curtailed to April

The UK government says that support to cap average energy bills for domestic users will end in April, instead of running for two years as previously planned.

Under the scheme a typical household bill, paid via direct debit, will be £2,500 a year – although it depends on how much energy is used, and some will pay more.

It is not clear what will be available to help residential users from April. The chancellor said there will be a review to decide.

“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,” the chancellor said.

Business customers were only ever promised help for the first six months. Mr Hunt said any support for businesses in future will be targeted “to those most affected”.

Other measures ditched include the freeze on alcohol duty rates, and plans for a new-VAT free shopping scheme for non-UK visitors.

Spending cuts

The chancellor indicated there were “more difficult decisions to take” on both tax and spending.

“All departments will need to redouble their efforts to find savings, and some areas of spending will need to be cut,” he said.

We will likely know more about how this will impact public finances at the medium-term financial plan

Any cuts to spending on English services will have an impact on the cash available in Wales controlled by the Welsh government, which is mostly sourced from the Treasury.

Welsh Labour ministers will set out their spending plans later this year.

What is staying?

The 1.25% rise to national insurance – a key Boris Johnson policy aimed at raising cash for social care and the NHS – was reversed in the mini-budget.

Mr Hunt made clear the cut will stay.

Cuts to stamp duty in England will remain too – the Welsh government followed with changes to land transaction tax following that decision.

LTT is levied at different rates to England, with the threshold being £225,000 and with no specific rate for first-time buyers.

What have Welsh politicians said?

First Minister Mark Drakeford tweeted that the chancellor’s actions “will shrink the economy causing a deeper, longer lasting recession. We will all pay the price for their failures.

“Although we’re unable to protect people fully against these proposed cuts, we’ll continue to do all we can to help you through this crisis.”

His Welsh Labour government in Cardiff said the “unravelling of the mini-budget shows the chaos at the heart of the UK government”.

Finance Minister Rebecca Evans in six weeks Westminster ministers had caused “mayhem in the financial markets, pushed up mortgage costs and stretched household budgets even further”.

The roll back on the energy package would cause “uncertainty”, she said.

“The new chancellor has signalled a new era of austerity to start to fill the hole in public finances. We will all pay for the government’s mistakes. But this is a crisis made in Downing Street and one it needs to address.”

The Chancellor’s actions will shrink the economy causing a deeper, longer lasting recession. We will all pay the price for their failures.

Although we’re unable to protect people fully against these proposed cuts, we’ll continue to do all we can to help you through this crisis.

— Mark Drakeford (@PrifWeinidog) October 17, 2022 The BBC is not responsible for the content of external sites.View original tweet on Twitter

Plaid Cymru Westminster leader Liz Saville Roberts accused Mr Hunt of planning “on imposing more painful austerity”.

“Westminster is in utter disarray unable to give any certainty to families facing extortionate bills and rocketing mortgages.”

Welsh Labour MS Huw Irranca-Davies said Liz Truss “is now prime minister only in title”.

“As Conservatives rip themselves and the economy to pieces, and will take a chainsaw to public services, it’s time for them to go,” he added.

While the political crisis for the prime minister deepens, the markets have received some reassurance over the UK’s fiscal discipline which the chancellor says will help provide stability for businesses and households.

Nevertheless, it raises practical questions for Welsh families about whether and how they will receive help with energy bills beyond April next year, as well as questions over what sort of public spending cuts might be on their way.

Welsh Labour politicians are demanding an immediate general election, but assuming that doesn’t happen, the Chancellor’s decision to delay indefinitely a cut in the basic rate of income tax does mean that Welsh ministers no longer have to make the difficult decision of whether to go along with a cut when they make their budget decisions in December.