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The new finance minister of Britain announced a comprehensive retreat on the tax and spending of the UK government; He planned a frantic effort to control jittery markets.
Jeremy Hunt has been on the job just for four days. According to the finance minister, he would reverse almost every tax measure announced about three weeks ago, including a proposed cut to the basic rate of income tax from April 2023. He said this reversal would raise £32 billion. The move of the finance minister represents a complete reversal of the tax-cutting plans of the Prime Minister, Liz Truss, and it left her in a perilous political position.
Hunt said that government cannot control markets but it can provide certainty about the sustainability of public finances. He added, “The UK will always pay its way.” This announcement on Monday eased alarm in the financial markets. It also elevated the bond price of the UK government and the pound climbed to nearly $1.13, i.e. 1%.
On Friday, Lis Truss fired her previous finance minister, Kwasi Kwarteng, and reinstated a big tax hike on corporations. But the moves did not satisfy investors but rather make them worried about the state of government finances.