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LONDON—New U.K. Chancellor Jeremy Hunt will make a statement later Monday, unveiling new public spending and tax policies as he looks to reassure markets that were spooked by Prime Minister
Liz Truss’s
previous tax cutting plan.
The statement is expected to reveal more details on which taxes will rise and where spending cuts will be made to try to put the U.K.’s finances on a stronger footing.
It will likely make additional U-turns on measures announced by former Chancellor
Kwasi Kwarteng
last month, which caused government borrowing costs to move sharply higher. Mr. Kwarteng was fired on Friday after both the markets and Conservative lawmakers rejected the plan to borrow to fund the biggest tax cuts since the 1970s.
“This follows the prime minister’s statement on Friday, and further conversations between the prime minister and the chancellor over the weekend, to ensure sustainable public finances underpin economic growth,” the U.K. Treasury said.
The full fiscal plan was due to be released on Oct. 31. A full analysis of the budget is still expected then, the Treasury said.
The government has already U-turned on two tax cuts, including a planned cut to corporate tax and the removal of a levy on top earners. Mr. Hunt this weekend said he had been given a clean slate to work from by Ms. Truss who is currently battling to save her job amid a slump in popularity.
Mr. Hunt’s predecessor announced a series of tax cuts on Sep. 23 alongside a costly package designed to protect households and businesses from surging energy costs as a result of Russia’s invasion of Ukraine.
Investors expressed concerns about the scale of borrowing required at a time of high inflation and fast-rising interest rates. Higher interest rates increase borrowing costs and put government finances on a precarious footing.
Uncertainty about the outlook for borrowing led to a sharp fall in U.K. government bond prices and the Bank of England was forced to intervene in the market to prevent what it described as a “fire sale” driven by U.K. pension funds.
That intervention ended Friday, raising questions about investor confidence in the weeks before the planned statement on medium-term borrowing plans on Oct. 31. Worryingly for U.K. policy makers, government bond prices fell again on Friday.
—Paul Hannon contributed to this article.
Write to Max Colchester at [email protected]
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