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British chancellor to pull back on most of Liz Truss' proposed tax cuts

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Britain's Chancellor of the Exchequer Jeremy Hunt delivers a statement in the House of Commons, in London on Monday. Photo courtesy of U.K. Parliamentary Recording Unit/EPA-EFE
Britain's Chancellor of the Exchequer Jeremy Hunt delivers a statement in the House of Commons, in London on Monday. Photo courtesy of U.K. Parliamentary Recording Unit/EPA-EFE

Oct. 17 (UPI) -- New British Chancellor Jeremy Hunt said Monday he is killing most of Prime Minister Liz Truss' tax cuts, which had roiled the British economy and dropped the value of the pound since they were announced last month.

Hunt made the comments as part of an emergency statement before he addressed the House of Commons later in the day.

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In his address before the House of Commons, Hunt said the government will have to make decisions of "eye-watering difficulty" but that those decisions would be made in accordance with "core compassionate conservative values."

Earlier Monday, Hunt said he would keep cuts to stamp duty while the National Insurance remains in place. He said he will get rid of the planned 1% cut in the basic rate of income tax, putting it on hold indefinitely, keeping it at 20%.

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He added that the energy price guarantee will no longer last two years but until April and will then be reviewed. The dividend tax cut will be abolished, along with value-added tax-free shopping, alcohol duty freeze and 2021 reforms.

Hunt said that "more difficult decisions" on tax and spending are coming and that cuts will have to be made.

The chancellor said he will publish a plan to get debt down in the medium term on Oct. 31, according to The Guardian.

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"The reason the United Kingdom has always succeeded is because at big and difficult moments we've taken tough decisions in the long-term interests of the country, and in a way that is consistent with compassionate conservative values. That is what we will do now," Hunt said.

During the House of Commons session, Rachel Reeves of the Labour Party said that British citizens will be paying a "Tory mortgage premium" for years to come.

"I've shown Conservatives can raise taxes. Will [Reeves] show if Labour are willing to restrain spending?" Hunt said in response to Reeves.

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The British pound continued to bounce back on Monday, days after Truss dumped Chancellor Kwasi Kwarteng in favor of Hunt.

A "mini-budget" proposal, which included steep tax cuts, had been proposed by Kwarteng. That sent the British financial sector into a tailspin, with the pound dropping to $1.03 against the U.S. dollar last month.

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On Monday morning, the pound traded at $1.13, up about 1%. A Treasury spokesman said Hunt would make a statement about his Medium-Term Fiscal plan later Monday.

"I think you'll see a positive reaction to the statement, assuming that the math adds up a bit more than it did before," Shanti Kelemen, chief investment officer at M&G Wealth, told BBC News.

"What we saw on Friday, as we had markets rise in the lead-up to the news that Kwarteng was resigning, but then as soon as it happened, we had a sell-off afterward."

Hunt stressed over the weekend that growing the economy remains the overall goal, but it must be based on stability.

"The drive on growing the economy is right -- it means more people can get good jobs, new businesses can thrive and we can secure world-class public services," Hunt said, according to CNBC. "But we went too far, too fast."

Shadow Treasury leader Pat McFadden said Hunt's decision to make an emergency statement showed "ministers are now terrified of market reaction," according to The Guardian.

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