So, the Hunt proposes to reverse almost all of Kwarteng’s budget. Given how much of it benefited the wealthy (or even the really wealthy), it’s hard to be critical. But not impossible.
Some things to note.
- The planned cut in income tax to 19p is out, and indefinitely (though given there will have to be an election in the next year or two, is he just putting it in his hat to bring out later, Paul Daniels style?)
- The cut in dividend taxes is abolished – clearly that comes into the ‘wealthy’ category.
- The cuts to stamp duty will remain and with them my comments about the number of first-time buyers who are going to buy a place for £450k
- The freeze on alcohol duty will go – best buy in supplies soon?
But perhaps the most worrisome change is that the energy price guarantee will no longer last two years – only till April next year. It will be the subject of a Treasury review which will report before then.
As before I have little doubt that there are people receiving government help who don’t need it – or don’t need so much. My worry with anything that says “treasury review” is that they will start from how much they think they can afford – usually less than anyone else thinks is absolutely necessary – and then consider how best to action this.
So, for instance, would they offer subsidy ONLY to folk on Universal Credit? Somehow, I doubt it. Elderly Tory Party members (who won’t be happy their tax cuts have gone) feel the cold as well. Pensioners too then?
It’s very hard to say how this come out. For instance what will the price of energy be by April next year (six months away). Probably unlikely to have come down (more than a little) but vanishingly unlikely to have gone back to where they were this time last year. So the scale of the problem isn’t easy to predict.
But more than the scale, if, as the Hunt claims, support needs to be more targeted then they face two problems.
- Who are the targets? One of the problems they face is the poverty of UK government data and payment mechanisms.
- How much are they prepared to spend? Clearly we don’t know, but it seems a good starter for 10 that it will be less than we spend now.
One final thing, note the similarly between this and the content of my quote from Susana Cruz, at Liberum Capital, that, “Until the market sees a clear strategy to fund the energy cap freeze and other measures, we do not expect the pressure on UK gilts and sterling to ease, nor the pressure on equities, which is coming from persistent recession fears.”
There is another side to this, though – the cost of the price cap. The price cap has put any number of energy suppliers (as opposed to producers) out of business, as the gap between what they can charge and what they have to pay for supplies widens. One advantage some have had was to buy ahead at the ‘old prices’, but that is clearly going to peter out with time, meaning more and more are going to return losses, becoming unsustainable. Some of these are UK owned – for instance Octopus – but some are owned abroad, most notably and obviously EDF, but also such as Scottish Power (owned in Spain). How much pressure is Hunt going to come under not just from large supply companies here (eg British Gas or SSE) but also from abroad to offer some subsidy to them. Note the reference to “fund the energy cap freeze”.
These though are only parts of the Hunt’s statement – we get the cuts next week he says, completing the similarly with Cruz. “The Chancellor is yet to reveal a clear strategy to finance its growth package (or planned expense cuts) so for now, his intent to reduce debt as a percentage of GDP does not seem plausible.”
All we can do is see who is taking the rap for this. Truss has been shoved all about concerning cuts – for instance the difference between increases to cover inflation (so protected in real terms) or the rise in wages (the latter a real terms cut), or to leave them at the level they are now (so the biggest real terms cut). Hunt though is not subject to this.
Let’s see what he’s got in due course since as Chris Mason notes “What a day. And it’s not even lunchtime.”
4 thoughts on “A jet plane does a hand-brake turn (with thanks to Faisal Islam)”
Does this reversal of the mini budget measures make the chancellor head of the anti growth coalition?
LikeLiked by 1 person
On the Friday 1 week before Kwasi ( Quasi he should now be called )
Stood up and introduced the pre planned so called fiscal statement to parliament having avoided OBR legal responsibility by not referring to his event as a Budget and having disposed the most Snr.civil servant that would have held the coat tails of the Mad Dogs
I immediately concluded that upon the Truss statement that if indeed Quasi did actually stand up 1 week later and introduced to Parliament
That 100 % control of events was now passed to the International money markets with all the consequentially and amplifying effects
Not only that once you spook the markets this would force the market to
Completely reconsider as to how the UK should be assessed fiscally from now on and forever so
That is quite simply only the very beginning of how the Markets will now influence UK policies
In simple terms if you manage to convey in lay man terms and compare it to the fate of the unsinkable maiden voyage of the SS Titanic
1.Brexit is the iceberg
2. The Titanic having no binoculars in the Crow,s nest
3.The Titanic captain ordering full speed ahead and altering course all in a effort to beat the Atlantic Crossing time and mainly
To massage the Ego of the
Ships very Wealthy greedy owner who was on board
And despite warnings from other shipping in the area of considerable icebergs in
The waters, far less stop or alter course the Titanic blissfully ploughed on
4.So in conclusion hitting the iceberg was NEVER a accident it was only one waiting to happen
Therefore what Truss done
Is exactly the same and now deserves to go down with the ship but never ever with honour
As for Scotland although the Iceberg has now been fatally been crashed into
The crew are still to realise the ship is sinking and that none shall come to the rescue in time,and the Bow still above the water line
Therefore board as soon as possible the INDY lifeboats
And sail away
Speed ye Bonnie Lifeboats
LT’s Energy price guarantee was always a freebie to the energy companies at future taxpayers expense. It paid out at the price of gas generated electricity rather than the true cost of production across the fuel mix which is why it is ludicrous that consumers in Scotland (where renewable energy production is between 95 and 125% of demand) end up paying gas based prices.
In addition it isn’t targetted so there is no incentive on high consumers to modify their behaviour, I understand that in Germany the subsidised rate covers a certain level of consumption and then the subsidy reduces as consumption increases until all units are at full market price. Even this is imperfect but it leaves lots of financial elbow room to identify and then help those whose energy needs are exceptional (elderly, disabled, poorly housed, colder climate) through insulation and top-up payments.
As long as those who really need it are protected then I am in favour of the original scheme being truncated.
BTW did anyone else notice the row over the bill submitted by Jacob Rees-Mogg? Apparently as currently drafted it will give him (as SoS for BEIS) unlimited powers over the energy sector in perpetuity, not just pricing but infrastructure, ownership and policies. Companies operating in the sector not happy having been given just 24 hours advance notice of the legislation – something to watch out for.https://www.theguardian.com/business/2022/oct/16/rees-mogg-accused-of-grabbing-absolute-power-over-uk-energy-industry
LikeLiked by 3 people
I recall a letter from a lady in I suspect the National, where she highlighted the sheer nonsense of her living off the beaten track in Scotland with a huge wind generator dominating her view, trying to come to terms with not only paying exorbitant prices for gas generated power, but being additionally penalised by a 30 year old “National Grid” model which bore no resemblance to her present relationship to the source of power.
There was so much wrong with the Tory designed privatised energy market model, yet Labour changed not a thing, and that’s because the Treasury has and continues to this day benefited handsomely from the arrangement.
Perhaps in these global warming days we need a government, not just one in rehearsals..
LikeLiked by 1 person