Market rebuke | Mint

As U-turns go, it was dramatic. Jeremy Hunt, the new British chancellor of the exchequer, on Monday literally undid almost all the mini-budget proposals presented by his predecessor Kwasi Kwarteng that had sent financial markets into a tizzy. Foremost, a controversial plan to cut the basic income tax rate, seen as a gift to the rich, has been put off indefinitely. Other planned cuts to dividends taxes, off-payroll working changes, a new value-added tax-free shopping scheme and a freeze on some alcohol duties have also been dropped. Further, in an attempt to slash spending and boost revenues, Hunt said that the government’s plan to cap energy prices for two years will work universally only up to April and will be targeted at poorer households thereafter. These moves, he said, are aimed at instilling “confidence and stability”. It was a relief for investors alarmed by measures they saw as fiscally reckless in the current context. It was also a victory for markets, especially the market for government bonds, whose thumbs-down caused a ruling-party uproar and forced this reversal amid whispers of moves to replace Prime Minister Liz Truss. She may have switched finance ministers, but the fact that the earlier proposals were patently part of her economic agenda might haunt her leadership. After Brexit, whose wonders were vastly oversold by the UK’s ruling Conservative party, the country can hardly afford errors of policy. An ideological scramble for low taxation at the wrong time signalled a belief in the sort of “fairy tales” Rishi Sunak cautioned against.