New Chancellor of the Exchequer Jeremy Hunt has "ripped up" the UK Government's spending policies by announcing a number of big changes to the mini-budget that was unveiled just weeks ago. Hunt, who replaced Kwasi Kwarteng as Chancellor last week, confirmed that a number of flagship policies will be either tweaked or abandoned, with only two now remaining.
U-turns have been made on a number of key tax cutting policies, with the Government's plans to cut the basic rate of income tax from 20 per cent to 19 per cent cancelled for the foreseeable future. Hunt also confirmed that a big change would be made to the energy price guarantee which was announced less than a month ago, with the scheme to cap all household energy bills for two years now set to be cut from April. You can read more about these reversals here.
However, there was seemingly no reversal on one of the most divisive policies in the doomed mini budget, with the Chancellor pressing on with plans to scrap the cap on bankers' bonuses. Subscribe to the WalesOnline Money newsletter for the latest news, tips and tricks on all things money.
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During a live address to the nation on Monday, October 17, Hunt made no mention of the controversial cap which is imposed by the EU and limits payouts to no more than two times bankers' salaries. However, Treasury sources have now confirmed that the cap will be scrapped, and had not been mentioned in the Chancellor's announcement as it does not affect state finances.
The Trade Union Congress recently found that bonuses in the financial and insurance sector have increased at more than twice the speed of wages since the 2008 financial crisis. They are now at their highest level on record, worth around £20,000 a year on average.
Kwarteng had announced last month that the cap would be lifted with the policy designed to "shake up" rules covering the financial sector and boost growth following Brexit. The EU's rules on limiting bankers' bonuses have long been criticised by City bosses, who argue that they lead to higher base pay, which in turn can push up a banks' fixed costs.
However, reversing the cap has also been widely criticised, with many arguing that it would only make wealthy people wealthier during a cost of living crisis that is seeing millions of households struggling on a day-to-day basis. After it was confirmed that the new Chancellor would be moving ahead with the plans, the reversal was slammed as "bizarre" and "damaging" by fellow politicians.
Speaking in the House of Commons on Monday, Labour Shadow Chancellor Rachel Reeves said: "What a contrast, that cuts to benefits are still on the table but the one thing that the Chancellor couldn't bring himself to reverse today was lifting the cap on bankers' bonuses. Why is this the last policy standing in this disastrous mini-budget?"
MP for the Rhondda, Chris Bryant, tweeted: "Incredible that ending the cap on bankers’ bonuses remains. Their priorities…," while Liberal Democrat Leader Ed Davey said: "So much damage has already been done by these reckless Tories. Now they will slash spending on our NHS and schools, while propping up bankers’ bonuses to keep their donors happy." He added: "General Election NOW."
Aberavon MP Stephen Kinnock also asked whether the "trickle-down experiment" was "morally justifiable", while MP for Croydon North Steve Reed wrote on Twitter: "The Tories are sticking with their plan to uncap bankers’ bonuses while forcing nurses to take real-terms pay cuts in the middle of a Tory cost-of-living crisis. Grotesque."
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