Jeremy Hunt has contributed to reducing the British government’s lack of credibility with investors. The country’s new finance minister came to the rescue last month after then-Prime Minister Liz Truss spooked the currency and bond markets with unfunded tax cuts. On Thursday, less than two months after the disaster, the “mini-budget” was submitted. A package of 55.000 million pounds (€63 billion) from spending cuts and tax increases, even as the country is heading into recession.
Despite the fact that the media has been reporting Black hole From the country’s public finances, Hunt’s budget plan takes a gradual approach to fiscal adjustment. Most of the money comes from increasing and expanding the tax on excess profitability of power companies, from 25% to 35%, and a new 45% tax on electricity generators.
The UK Treasury projects that these measures – which broaden the definition of a tax on profits falling from the sky – will raise £7,500m (€8,600m) in the financial year ending April 2024 and contribute nearly £6,000m (7bn) four years later. The government will also raise significant additional revenue by freezing corporate and income taxes, rather than increasing it on the basis of inflation.
On the spending side, most savings come from limiting recurrent budgetary spending to an annual increase of 1% after accounting for inflation, while public investment remains stable in nominal terms. But both measures will not take effect until 2025.
Instead, a series of transfers will already be in place for low-income families next year. Hunt also extended Truss’s energy subsidy for another year on modified terms, at half the cost.
Combined, these measures will help ease recessionary forecasts for next year, according to the Office for Budget Responsibility. However, the British economy will contract by 1.4% in 2023. By the time it starts to grow again, British households will have suffered two consecutive years of falling real disposable income, the office says.
If these predictions come true, the UK’s debt will reach 111% of GDP by April 2027. Delaying the damage may also help fulfill new Prime Minister Rishi Sunak’s expectations for the next general election, which is scheduled earlier in January 2025. If that fails, Hunt will have passed responsibility to the incoming Labor government.
Authors columnists for Reuters. The opinions are yours. Translation Carlos Gomez DownWell, it’s a responsibility five days
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