Mini-budget U-turn: VAT-free shopping for tourists won’t return after all

“Almost all” of the measures set out in the UK’s mini-budget last month will be scrapped, including the return of VAT-free shopping for overseas visitors, new chancellor Jeremy Hunt has announced.

The U-turn comes as the government attempts to reassure markets which have been rattled since the mini-budget was announced in September.

It means VAT-free shopping for tourists won’t return after all - a move that the retail industry had urgently been calling for since it was scrapped at the start of last year.

Paul Barnes, the chief executive of the Association of International Retail, said the reversal will “come as a hammer blow to UK tourism and the British high street”.

“This short-sighted move is based on inaccurate and incomplete projections, and risks putting a brake on the return of international visitors who are vital drivers of economic growth throughout the UK,” he said.

The reversal of measures on Monday also included a planned cut to the basic rate of income tax from 20 percent to 19 percent in April 2023 - one year earlier than planned. Hunt said the rate will remain at 20 percent “indefinitely until economic circumstances allow for it to be cut”.

Planned cuts to stamp duty and National Insurance will go ahead.

Energy cap to be reviewed next year

Additionally, an energy price cap previously announced by prime minister Liz Truss will now last only until April 2023 rather than for two years. It will be reviewed next year.

The energy cap, which was the biggest single expense in the mini-budget, sees the average household energy bill capped at 2,500 pounds, Truss announced last month.

Hunt said Monday: “This is a landmark policy supporting millions of people through a difficult winter, and today I want to confirm that the support we are providing between now and April next year will not change.”

But he said that beyond that, it “would not be responsible to continue exposing public finances to unlimited volatility in international gas prices”.

A Treasury-led review will decide how the government will support energy bills beyond April 2023.

“The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need,” Hunt said. “Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency.”

Overall, Hunt said the new measures announced Monday will raise 32 billion pounds a year.

Hunt will give a statement to the house of commons at 15.30 GMT.