Rishi Sunak's executive is looking to save £55bn ($65bn). Among other measures, it will increase its tax burden on the exceptional profits of energy companies from the current 25% to 35%
< img class="aligncenter" src="/wp-content/uploads/2022/11/the-uk-announced-heavy-tax-increases-and-budget-cuts-to-clean-up-finances- public-dbd129e.jpg" alt="The UK announced big tax increases and budget cuts to clean up public finances" />
A woman holds up sterling notes
The The British government presented this Thursday measures to clean up public finances, saving 55 billion pounds (65 billion dollars), of which almost half will come from tax increases b> and the rest of cuts in public spending.
Among these measures, the United Kingdom b> will increase its tax on exceptional profits from energy companiesfrom the current 25% to 35%, Finance Minister Jeremy Hunt announced before Parliament. He also confirmed that the country has already entered a recession and its GDP is expected to fall 1.4% in 2023.
“Our priorities are stability, growth and public services”, said Finance Minister Jeremy Hunt as he presented his “autumn budget” to Parliament.
“We are honest about the challenges we face and fair with our solutions,” he assured while imposing the return of austerity to a country of 67 million inhabitants, the sixth largest economy on the planet, mired in crisis.
This is part of a global trend driven in recent years by the pandemic of covid-19 and the Russian invasion of Ukraine, which hurt growth and skyrocketed energy prices, defended Hunt.
He however avoided mentioning the consequences of Brexit -effective from the beginning of 2020-, which according to officials of the Bank of England damage British foreign trade and make it difficult to recruit a much-needed workforce.
Finance Minister Jeremy Hunt
The minister confirmed that, according to data from the Office for Budgetary Responsibility (OBR), the Kingdom United Kingdom is already in recession and its GDP is forecast to fall by 1.4% in 2023. According to the Bank of England, this recession could last until mid-2024 and be the longest ever of British history.
Among the announced tax increases, London will increase from the current 25% to 35% its tax on exceptional profits from oil companies -driven by the skyrocketing prices in the context of the war in Ukraine- and will extend it for three years until 2028. Hunt also announced “a new temporary tax 45% to electricity producers”, including renewables, which benefit from the rate increase.
“Giving the world confidence”
With these measures, the new finance minister sought to fulfill his delicate mission of reassuring the markets about the reliability of the United Kingdom, after the chaos caused by the ultra-liberal economic policies announced in September by the government of the short-lived Conservative Prime Minister Liz Truss.
She presented a plan to “boost growth” that combined large energy subsidies with strong tax cuts without further financing than to fatten the already very large British public debt.
In a context of very high inflation, this caused unease in the financial markets, the pound fell to record lows and interest rates on public debt skyrocketed, dragging down loans to companies and families with them.
Fellow conservative Rishi Sunak, appointed less than a month ago to replace Truss, ousted from power after a month and a half, vowed to correct his predecessor's “mistakes.”
UK Prime Minister Rishi Sunak
With this mission, Hunt declared himself determined to “give the world confidence in our ability to pay our debts” and announced new rules for controlling public debt.
The Kingdom< /b> United thus sees the return of austerity policies comparable to those adopted as a result of the 2008 banking crisis, the consequences of which are still being felt, especially in public health.
Hunt listed among his priorities “protecting the most vulnerable” and “avoiding tax hikes that hurt growth”.
The executive will thus update pensions and social benefits in line with inflation. It will also dedicate more funds to public health still weighed down by record waiting lists since the start of the pandemic in March 2020.
In return, it will allow local administrations to raise taxes municipal funds to finance social assistance and will freeze some tax thresholds, especially on income.
This will make more households pay taxes, by moving to a higher bracket thanks to their salary increases, although these are lower than the galloping inflation, of 11.1% year-to-year in October, losing purchasing power in real terms.
Promising to “ask more of those who have more”, Hunt specified that the maximum bracket in income tax, of 45%, will now be applied from 125,000 pounds a year instead of the current 150,000.
(With information from AFP )