New UK Finance Minister Jeremy Hunt has ripped up a tax-cutting mini-budget by his predecessor leading to the pound rallying against the dollar.
Hunt scrapped the financial plan unveiled last month by the new Prime Minister Liz Truss's then-finance minister Kwasi Kwarteng.
As the mini-budget saw the pound fall to record lows against the dollar amid chaos in the financial markets, Kwarteng paid the price by being sacked.
Now his replacement, the fourth finance minister in as many months, has brought in tax cuts that have seen the pound jump by more than one percent against the dollar on Monday.
"No government can control markets but every government can give certainty about the sustainability of public finances," Hunt said in a televised address that demolished the maligned mini-budget.
"We will reverse almost all the tax measures announced... three weeks ago," Hunt said, adding: "The most important objective for our country right now is stability."
The pound bounced back and yields on UK government bonds, or gilts, slid on the fiscal policy U-turns announced by Hunt, whose official title is Chancellor of the Exchequer.
"The markets are responding positively to the new Chancellor's plans to reverse almost all of the tax cuts announced by his predecessor," noted Victoria Scholar, head of investment at Interactive Investor.
"Jeremy Hunt's focus on reassuring the markets and reinstating confidence appears to have worked so far with gilt yields trading lower and sterling pushing higher."
The Bank of England on Friday ended its emergency purchasing on UK government bonds triggered by unravelling markets in the wake of Kwarteng's September mini-budget.
Monday's reversals also lifted London's benchmark FTSE 100 shares index.
Hunt estimated that the tax changes would raise about $36 billion per year, after economists claimed the government faced a $68 billion black hole in the public finances.
He also warned of spending cuts: "There will be more difficult decisions, I'm afraid, on both tax and spending."
The new finance minister scrapped plans to axe the lowest rate of income tax, and curbed the government's flagship energy price freeze – pulling the plug in April instead of late 2024 as originally announced.
After April, the government will "review" its energy support package, he said.
