Chancellor Jeremy Hunt reverses nearly all Trussonomics tax cuts
17th October 2022 12:02
by Victoria Scholar from interactive investor
Just weeks after new Chancellor Kwasi Kwarteng unveiled his mini-budget, almost all its policies have been ditched. Here's how the market reacted to the latest chancellor's dramatic about-turn.
The markets are responding positively to the new chancellor’s plans to reverse almost all of the tax cuts announced by his predecessor Kwasi Kwarteng in the mini budget on 23 September.
Jeremy Hunt’s focus on reassuring the markets and reinstating confidence appears to have worked so far with gilt yields trading lower and sterling pushing higher.
The FTSE 100 is staging gains with utilities and housebuilders, the most budget-sensitive sectors outperforming as Trussonomics is unwound with the reversal of the biggest tax cuts in 50 years.
Although we heard about Hunt’s tax plans, spending question marks remain until the medium-term fiscal plan is announced on 31 October when the chancellor will outline how he plans to cut government spending in order to plug the multi-billion pound budget shortfall, raising concerns about the prospect of a new era of austerity.
The retreat in gilt yields and sterling’s appreciation should help to settle the mortgage market and offset some of the UK’s imported inflationary pressures, possibly requiring less aggressive interest rate increases from the Bank of England at its next monetary policy committee meeting at the start of November.
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