Second major mini-budget U-turn as government raises corporation tax

The government will raise corporation tax despite promising not to do so in the mini-budget.

Kwasi Kwarteng, who was today sacked as chancellor, promised in the mini-budget last month to keep corporation tax at 19% instead of increasing it to 25% as planned in April.

Liz Truss confirmed her government’s change of direction at a news conference hours after dismissing Mr Kwarteng.

Ms Truss said: “It is clear that parts of our mini-budget went further and faster than markets were expecting so the way we are delivering our mission right now has to change.

“We need to act now to reassure the markets of our fiscal discipline.

“I have therefore decided to keep the increase in corporation tax that was planned by the previous government.”

She said the change would raise £18bn for the public purse.

She added: “We will do whatever is necessary to ensure debt is falling as a share of the economy in the medium term.”

It is the second major tax cut U-turn in three weeks after the government confirmed it would not go ahead with a plan to scrap the 45p top rate of income tax promised in the mini-budget on 23 September.

Mr Kwarteng cut short his trip to the International Monetary Fund in Washington DC and returned to the UK on Friday morning as expectations of another significant U-turn mounted.

But his early return was not enough to save his job and less than two hours after he landed, he had been sacked.

Former foreign secretary Jeremy Hunt has been appointed chancellor.

The past three weeks have been marked by economic turmoil, with the pound reaching a record low against the dollar, interest rates soaring and the Bank of England having to intervene.

The reversal follows warnings from the Institute for Fiscal Studies, a leading economics think tank, that Mr Kwarteng’s £45bn package of unfunded tax cuts had left a £62bn black hole in the public finances.

The government has come under increasing pressure from senior Tories to take steps to reverse aspects of the mini-budget to allay market concerns.

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