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Liz Truss reverses plan to scrap rise in corporation tax in another U-turn

UK prime minister Liz Truss holds a press conference in the Downing Street Briefing Room on 14 October. Photo:Daniel Leal-WPA Pool/Getty
Prime minister Liz Truss holds a press conference in the Downing Street Briefing Room on 14 October. Photo:Daniel Leal-WPA Pool/Getty (WPA Pool via Getty Images)

Liz Truss has abandoned key parts of the mini-budget as she announced plans to raise corporation tax this Spring, less than a month after the move was scrapped.

The reversal, the latest in a series of U-turns from the government since the mini-budget, comes after it backtracked plans to ditch the 45p top rate income tax earlier this month.

Speaking at the lectern inside Downing Street she reinstated a planned increase in corporation tax from April, returning to plans originally laid out by former chancellor Rishi Sunak under Boris Johnson's government.

This means that corporation tax will now rise to 25% next year from 19%. The move is expected to raise £18bn per year, Truss said.

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Read more: How record high US inflation can hit UK markets, the pound, and 'Trussonomics'

Truss said her mission remains the pursuit of a "low-tax, high-wage, high-growth economy", but accepted that parts of the mini-budget last month went "further and faster" than markets had expected.

Admitting she had to change course in a short press conference that lasted around 10 minutes.

"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," she said.

Truss ruled out resigning as PM, adding: "I am absolutely determined to see through what I have promised".

The prime minister sacked Kwasi Kwarteng as chancellor after the government's disastrous fiscal plan caused market turmoil, a bailout of pension funds by the Bank of England, and rising mortgage rates.

Truss who summoned Kwarteng back from the International Monetary Fund annual summit in Washington to inform him of his fate – said she was "incredibly sorry" to lose him.

The PM appointed Jeremy Hunt, former Tory leadership contender and former foreign and health secretary, as new chancellor, shortly after Kwarteng's sacking.

She said Kwarteng's successor, was "one of the most experienced and widely respected government ministers and parliamentarians", adding that Hunt "shares" her "convictions and ambitions" for the country.

Hunt becomes Britain's fourth chancellor this year, after Sunak, Nadhim Zahawi and Kwarteng.

Chris Philip, the chief secretary, was reshuffled to another department in a clear out of Treasury ministers.

Watch: Jeremy Hunt made chancellor after Liz Truss sacks Kwasi Kwarteng