Chancellor Jeremy Hunt warns budget forecast will force 'decisions of eye-watering difficulty' after U-turns

The chancellor has announced “decisions of eye-watering difficulty” will have to be taken on October 31 after reversing many of the measures unveiled by his predecessor in the so-called “mini-budget”.

Jeremy Hunt said he would publish the Government’s fiscal rules alongside an Office for Budget Responsibilty (OBR) forecast at the end of the month.

Hunt, who took up the position after the sacking of Kwasi Kwarteng 38 days into his Number 11 tenure, previously revealed a U-turn on a host of Liz Truss’ flagship leadership policies including curtailing help with energy costs and slashing tax cuts.

However, he cautioned further economic turmoil was to come, adding Russia’s invasion of Ukraine had placed “inflammatory pressures” on global prices.

Speaking in the Commons, he said: “I want to be completely frank about the scale of the economic challenge we face. We have had short-term difficulties caused by the lack of an OBR forecast alongside the mini-budget.

“We cannot control what is happening in the rest of the world, but when the interests of economic stability means the Government needs to change course, we will do so and that is what I have come to the House to announce today.

“But there are also inflationary and interest pressures around the world.”

Opponents on the other side of the Commons jeered as Hunt kicked off his announcement as shaped by “compassionate Conservative values”.

It came after leader of the House, Penny Mordaunt, said the Prime Minister was not “hiding under a desk” after she failed to arrive until moments before Hunt began speaking.

She was greeted with sarcastic cheers as she took her seat following an undisclosed absence.

Mordaunt was repeatedly asked to give reasons for her late arrival but denied, while speaker Lindsay Hoyle rejected a point of order demanding the PM explain for herself.

When he began his statement, Hunt repeated announcements on the energy price cap alongside previous policy changes in a pre-statement issued on Monday morning.

He announced the Government will 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 £5.3bn in 2023-24 – although this does not affect Scotland which has its own tax policy.

The Government will also ditch plans for new VAT-free shopping for international tourists which had been welcomed by Scotland’s tourism industry and the reversal of the 1.25% point increase in national insurance contributions will continue.

He added the PM had “reluctantly” agreed it would not be responsible to keep the energy price guarantee beyond April 2023, telling the Commons: “It is the biggest single expense in the growth plan and one of the most generous schemes in the world, it’s a landmark policy for which I pay tribute to my predecessor, my right honourable friend from Spelthorne and it will support millions of people through a difficult winter reducing inflation by up to 5%.

“So I confirm today that the support we are providing between now and April next year will not change.

“But beyond next April, the Prime Minister and I have reluctantly agreed it would not be responsible to continue exposing the public finances to unlimited volatility in international gas prices.

“So I’m announcing today a Treasury led review into how we support energy bills beyond April next year, the review’s objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.”

Speaking in the Commons, he said: “That means decisions of eye-watering difficulty. But I give the House and the public this assurance, every single one of those decisions, whether reductions in spending or increases in tax, will be shaped through core compassionate Conservative values that… prioritise the needs of the most vulnerable.”