Anadolu Agency | Anadolu Agency | Getty Images LONDON — The U.K. government on Thursday unveiled a sweeping 55 billion pound ($66 billion) budget plan as it seeks to plug a gap in public finances and restore Britain’s economic credibility even as the country lurches into recession. . Chancellor of the Exchequer Jeremy Hunt, in his long-awaited autumn opening statement, outlined around £30 billion in spending cuts and £25 billion in tax rises. The measures included a six-year freeze on income tax thresholds and a cut in the top rate of income tax to £125,000 – moves in direct contrast to the big cuts put forward in September’s disastrous mini-budget. “Unfunded tax cuts are just as dangerous as unfunded spending,” Hunt told the House of Commons. Hunt said the measures would reassure markets that the government and the Bank of England were now working on a “key”. “We need fiscal and monetary policy to work together,” he said. “That means the government and the Bank working non-stop. It means, in particular, giving the world confidence in our ability to pay our debts.”
A recessionary fiscal plan
The measures will increase financial hardship for millions of Britons as they face the country’s worst cost-of-living crisis in decades and its biggest ever recession. But Hunt said it was necessary to curb 41 years of inflation and restore the UK’s reputation. dubbing the plan the “ultimate growth strategy.” “We must continue a relentless fight to reduce (inflation), including a firm commitment to rebuilding our public finances,” Hunt said. Among the other measures announced were a 10% rise in state pensions, benefits and tax credits — in line with September inflation — and an increase in the National Living Wage to £10.42 an hour for those aged 23 and over . The finance minister also confirmed that the energy industry will face an expanded tax windfall of 35% from 25%. Thursday’s statement was accompanied by a long-awaited set of forecasts from the UK’s independent Office for Budget Responsibility (OBR), which painted a bleak economic picture for Britain. Hunt said forecasts show the UK is now in recession, but that the government’s plan will ensure the recession is shallower and unemployment lower than originally forecast.
Big test for the government
The UK’s new strategy sets the tone for Prime Minister Rishi Sunak’s premiership as he presides over an era of fiscal austerity and declining support for the Conservative Party. It also marks a defining moment for Hunt, who was installed last month to restore UK credibility after predecessor Kwasi Kwarteng’s now infamous mini-budget of unfunded tax cuts triggered market chaos and emergency intervention. Although Hunt’s then boss Liz Truss stepped down at short notice – becoming the UK’s shortest-serving prime minister – she was retained by successor Rishi Sunak in a bid to ensure stability after months of political turmoil. Shadow Chancellor of the Exchequer Rachel Reeves said on Thursday that the new plans would leave the UK worse off than it was earlier this year. “Here we are at the end of 2022, three prime ministers, four chancellors and four budgets later,” Reeves said. “And where are we? In a worse place than where we started the year.” The UK is the only Group of Seven (G7) country not to have returned to its pre-pandemic size, having suffered a decade of almost stagnant income growth. The Bank of England has warned that the country is now facing its worst recession since records began a century ago. Official data released on Friday showed the economy shrank by 0.2% in the third quarter of 2022. A second consecutive quarter of negative growth going forward would indicate the UK is in a technical recession.
