LONDON: United Kingdom (UK) will Thursday hike taxes and slash public spending in a government budget that signals a return to austerity despite a cost-of-living crisis and recession headwinds.
Conservative Party Prime Minister of the UK Rishi Sunak, who took office just three weeks ago, has vowed to fix the economic havoc created by his short-lived predecessor Liz Truss from Conservative Party.
Even though Sunak is aware of soaring energy bills and food prices recording UK inflation at a 40-year high and interest rates ballooning, likely to make budget a new era of austerity, similar to the one that followed the 2008 global financial crisis.
Finance minister Jeremy Hunt will present his crucial budget in parliament, alongside official growth and inflation forecasts unlikely to bring joy to an economy battered also by Brexit and costly government help during the Covid pandemic.
Jeremy said that “Tackling inflation is my absolute priority and that indicates the difficult decisions on tax and spending we will make.”
“Restoring stability and getting debt falling is our only option to reduce inflation and limit interest rate rises,” Jeremy added.
According to media report, Jeremy is expected to unveil tax hikes and spending cuts of up to £60 billion ($70.5 billion) to bring down debt.
Heading into the budget, Jeremy has likened himself to the penny-pinching miser Ebenezer Scrooge in Charles Dickens’ festive favorite “A Christmas Carol”.
Bank of England
According to the Bank of England (BoK), Britain is already in recession after its economy shrank in the third quarter and is set to do so again in the final three months of the year,
The BoE, which is raising interest rates to combat sky-high inflation, has warned that UK economy may experience a record-long recession until mid-2024.
It comes after the central bank went on an emergency buying spree of UK government bonds after Truss’s unfunded tax-slashing budget sparked a collapse in the pound and an explosion in state borrowing costs during her 49-day tenure.
That cost Liz Truss the loss of premiership, but not before Truss had fired her finance minister Kwasi Kwarteng, replacing him with Hunt.
UK Finance Minister Hunt
The new finance minister Jeremy Hunt has set about reversing the much-criticised budget by curtailing a freeze in domestic fuel bills that have surged largely owing to the invasion of Ukraine by major energy producer Russia.
Reports suggest that Hunt will now go further, freezing income tax rate thresholds, meaning more people are dragged into higher tax brackets.
To help the poorest with rocketing energy bills, the government is expected to ramp up a windfall tax on oil and gas giants, whose profits have surged on fallout from the Ukraine war.
The Financial Times on Tuesday added that Hunt is preparing a windfall tax on firms generating electricity, whose profits have also soared this year.
UK Premier Rishi Sunak
The pound and bond markets have regained somewhat of an even keel after Sunak took the office and political turmoil subsided, but retail lenders’ mortgage rates remain elevated.
Sunak said that “I would really want people to be reassured that… all the decisions we make will have fairness and compassion at their heart.”
Britain’s Super Markets
Hoping that Sunak sticks to his word, chief executives of Britain’s biggest supermarkets published an open letter Tuesday urging the government to offer free school meals to far more children than the very poorest.
In a letter co-signed by bosses of supermarkets including Britain’s biggest retailer Tesco. Chief executives of Super Markets said that “We are committed to doing all we can to support (children) with several actions set to be implemented in the coming months, but we cannot do this alone,”
“We strongly urge you to consider the scale of children’s food insecurity across the UK and act without delay to prevent its devastating consequences,” statement added.
Opposition Party in UK Parliament
Britain’s main opposition Labour party has slammed Premier Sunak, and argued that a second wave of austerity is not the answer.
Labour’s finance spokeswoman Rachel Reeves said that “I don’t believe that austerity 2.0, after the austerity that we have gone through… is the right approach,”
“Public services are already on their knees,” added Reeves by calling it a “badge of shame” that nurses were planning to strike this winter.
Tens of thousands of staff in various industries have already gone on strike across Britain this year as inflation erodes wages.
