The British government announced its expected austerity budget, with £55 billion (62.8 billion euros) in tax increases and spending cuts, while also confirming that the country is in recession. Treasury Secretary Jeremy Hunt said the measures were needed to bring financial stability and support public finances following the recent market turmoil, emphasizing they would ease rather than exacerbate the recession. “In the face of unprecedented global headwinds, families, retirees, businesses, teachers, nurses and many others are concerned about the future. That’s why we’re coming out with a plan to weather the cost of living crisis and get our economy back on track. to build,” Hunt told delegates.
Markets were not convinced, the pound fell more than 1% against the dollar. A day after official data showed inflation in the UK had hit a 41-year high, over 11%, Hunt ushered in a new era of austerity following former Prime Minister Liz Truss’s disastrous and short-lived tenure.
The Office of Budgetary Responsibility (OBR) believed “that the UK, like other countries, is now in a recession,” the minister revealed to parliament, after forecasting a 1.4% contraction next year. Despite the recession, Hunt and Prime Minister Rishi Sunak are urging tough action after Truss unleashed a package of uncovered tax cuts that sent financial markets into panic.
The pound had reached an all-time low close to parity against the dollar in late September after Truss failed to disclose the impact of the tax cuts on growth and inflation. His mini-budget also led to temporary purchases of British government bonds by the Bank of England to stabilize the market.
Hunt confirmed tax increases for employees along with spending cuts. However, he promised to increase spending on the National Health Service. The minister added that benefits for the unemployed and pensioners would rise close to inflation and that the minimum wage would rise. At the same time, the government extended the freeze on its international aid budget introduced during the pandemic, a move condemned by non-governmental organizations.
Hunt also raised taxes on oil companies, whose profits have soared in the aftermath of the war in Ukraine, from 25% to 35% to fund aid for consumers hit by utility bills. The measure will apply until 2028. The government will also impose a new temporary levy on electricity production companies. The government added that a cap on annual household energy bills would be raised by a fifth to £3,000.
Rachel Reeves, an economics spokeswoman for Labour, the main opposition party, was critical of the budget. “The conservatives brought our economy down, gave up growth and threw inflation through the roof. As usual, it’s the common workers who pay the price.”
Source: DN
