Jeremy Hunt warns of 'eye-wateringly difficult' decisions as he tears up Liz Truss's economic plans

Political Editor Robert Peston on another day of high drama in Westminster as the new chancellor rips up the Prime Minister's disastrous economic plans

Liz Truss is battling to save her premiership as her new chancellor warned “eye-wateringly" difficult decisions would be needed to stabilise public finances after he ditched huge chunks of her economic plan.

Jeremy Hunt scaled back the energy support package - Ms Truss's first major policy announcement as prime minister - and U-turned on “almost all” the tax cuts announced by his predecessor Kwasi Kwarteng less than a month ago as he set out plans for billions of pounds of savings following weeks of turmoil on the financial markets.

Speaking to MPs on Monday, Mr Hunt warned of "decisions of eye-watering difficulty" as he set out his economic plans which he had earlier announced in an emergency televised statement.

Watch Jeremy Hunt's statement in the House of Commons as he tears up Liz Truss’s plan

Mr Hunt told the Commons the UK has faced “short-term difficulties” caused by the lack of an Office for Budget Responsibility forecast alongside the so-called mini-budget and "inflationary and interest pressures around the world.”

Energy bills support and will not be guaranteed from next April as part of Mr Hunt's overhaul of Ms Truss's plans.

Mr Hunt said he and the prime minister had “reluctantly” agreed it would not be responsible to keep the energy price guarantee beyond April 2023.

Chancellor Jeremy Hunt's mini-budget statement in full

The pound strengthened and UK government bonds rallied further after Mr Hunt's announcement to reverse key policies but shadow chancellor Rachel Reeves warned the “damage has been done” despite the “humiliating U-turns”.

“This is a Tory crisis made in Downing Street but ordinary working people are paying the price," Ms Reeves said.

“All that is left after these humiliating U-turns are higher mortgages for working people and higher bonuses for bankers. And their climb-down on energy support begs the question yet again – why won’t they extend a windfall tax on energy producers to help foot the bill?”

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Ms Reeves said people will be “paying a Tory mortgage premium for years to come”, adding: “Does the chancellor accept that once credibility and trust have been destroyed, it cannot simply be regained by a series of zig-zagging, chaotic U-turns?

In his earlier emergency statement, the chancellor said government spending in “some areas” will be cut. Last week at PMQs, Ms Truss said she is "absolutely" not planning cuts to public services.

Speaking in the Commons on Monday, Ms Reeves said: “The prime minister is barely in office, and she is certainly not in power. Only five days ago she said at Prime Minister’s Questions there would be ‘absolutely’ no public spending reductions.

“But after what we heard from the Chancellor today, every single public service is again at risk from the Conservatives, from our NHS nurses to our schools and to our servicemen and women, with the country paying the price for their incompetence.”

She asked Mr Hunt: “Can he admit once and for all that the market turmoil we are in was directly caused by the disastrous decisions of his predecessor and of the prime minister?”

Mr Hunt announced the government will also scrap plans to reduce the basic rate of income tax from 20% to 19% in April next year, a move that had been forecast would cost the Exchequer almost £5.3 billion in 2023-24 in a bid to bring “stability” following tumultuous weeks.

He said his tax cut reversals will raise some £32 billion a year as part of efforts to get the public finances back on track after market and mortgage turmoil unleashed by Mr Kwarteng's mini-budget.

The prime minister sat on the front bench behind Jeremy Hunt as he made his statement after Penny Mordaunt had earlier told MPs Ms Truss was "not under a desk".

Ms Truss sent cabinet minister Ms Mordaunt – viewed as a potential successor – to answer an urgent question from Labour on her appointment of a new chancellor amid the economic turmoil of recent weeks.

With jeers and shouts of “where is she?” and “weak” from MPs, Ms Mordaunt, who was deputising for the prime minister, said Ms Truss was "detained on urgent business".

Sir Keir Starmer mocked Ms Truss for not turning up to answer the urgent question, saying “the lady is not for turning – up”.

Addressing the Commons Leader, the Labour leader thanked her for answering the question put to the prime minister, saying: “I guess under this Tory government, everybody gets to be prime minister for 15 minutes.”

Jeremy Hunt's mini-budget - the main points:

  • Planned cut to stamp duty to remain, as will the government's reversal of the 1.25 percentage point increase in national insurance contributions

  • Help with energy bills for households will only last until April, with a review to find a “new approach” that will “cost the taxpayer significantly less”

  • The basic rate of income tax will remain at 20p indefinitely

  • Planned cut to income tax to be scrapped

  • Abolition of the health and social care levy remains

  • Removing the cap on bankers' bonuses remains

  • Plans for new VAT-free shopping for international tourists to be scrapped

  • Freeze on alcohol duty rates to go

A Redfield & Wilton poll released on Monday put Labour 36 points ahead of the Tories.

In a tweet about an hour after the chancellor’s statement on Monday morning, the prime minister said: “The British people rightly want stability, which is why we are addressing the serious challenges we face in worsening economic conditions.

“We have taken action to chart a new course for growth that supports and delivers for people across the United Kingdom.”

Chancellor Jeremy Hunt getting into a car at the rear of Downing Street before making his emergency statement Credit: Victoria Jones/PA

Mr Hunt announced that help with energy bills for households will only last until April, with a review to find a “new approach” that will “cost the taxpayer significantly less”.

Confirming a U-turn on the energy price guarantee, the new chancellor said: "The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.

“Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency.”

Ending the cap on bankers' bonuses was one of the remaining policies.

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The Treasury confirmed Mr Hunt had met with the governor of the Bank of England and the head of the Debt Management Office on Sunday night to brief them on the plans which will be released in full on October 31.

Sterling rebounded by more than 1.2% to 1.139 against the US dollar shortly after Mr Hunt gave his emergency statement to calm the financial markets.

Yields on 30-year government bonds, or gilts, eased back further by around 10%, as the new Chancellor set out plans to shave off billions of Government debt.

The interest on long-dated bonds hit a low of around 4.32% shortly after the first announcement.

Labour leader Keir Starmer speaking in the House of Commons as he asks an urgent question. Credit: PA

The prime minister continues to fight to hold on to her leadership. Angela Richardson has become the fourth Tory MP to call publicly for Ms Truss to stand down saying she the problems with the public finances were “100% down to the prime minister”.

Crispin Blunt, Andrew Bridgen and Jamie Wallis all called on the prime minister to quit on Sunday, while other senior figures within the parliamentary party expressed deep unease with Ms Truss’s leadership but stopped short of calling for her to go.

Downing Street sidestepped questions on whether Ms Truss will be resigning and said the prime minister remains “focused on delivery”, following her chancellor's statement.

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