Tax rises, government spending cuts: towards an austerity UK budget? – The world

In the midst of a cost of living crisis and with the country looking like it is headed for recession, what should we expect from Jeremy Hunt’s presentation? This Thursday, the British Chancellor of the Exchequer in particular will seek to repair the damage caused by volatile Prime Minister Liz Truss’s mini-budget.

Interest rates jump, the pound crashes

The “mini-budget” defended by Liz Truss had the markets panicking. Result: The Bank of England had to intervene immediately. (Neil Hall/EPA)

Combining massive support for energy bills and across-the-board tax cuts, this colossal project, estimated at between £100 and £200 billion, was to be financed mainly by borrowing from markets in the full swing of inflation and interest rates. But it sent markets into a panic and resulted in the pound falling to a record low, while government borrowing rates jumped, with household and business credit conditions in their wake. Result: The Bank of England had to intervene immediately.

After the austerity in 2008…

“Tackling inflation is my top priority and that will drive the tough tax and spending decisions we will announce on Thursday,” Jeremy Hunt said on Tuesday in response to a slight rise in unemployment between July and September. Accents that remind Britons of the severe austerity introduced in the wake of the 2008 financial crisis, which had resulted in severe cuts to public services, the effects of which are still being felt today, particularly in health.

Choose between heating and feeding

However, Rishi Sunak’s government ensures that the most disadvantaged are less affected, while many Britons sometimes have to choose between heating and eating. “It will be a very difficult budget presentation because we will ask everyone to contribute more. But we will ask people who have more to contribute more,” said Jeremy Hunt in front of British MPs on Tuesday. In particular, he assured that the government would continue to help households with their energy bills, even after the winter. An increase in pensions and allowances in line with inflation would also be on the table.

On Tuesday, the bosses of Britain’s biggest supermarkets also published an open letter calling on the government to extend a free school meals program to all children from the poorest families.

The energy giants involved?

Meanwhile, according to the British press, the government is seeking between 50 and 60 billion pounds in tax increases and spending cuts.

The energy giants, which have reaped record profits with skyrocketing market prices, should be put into action: An extraordinary tax, originally set at 25% of profits but including huge exemptions, and planned until 2025, could be raised and extended.

The Finance Minister is also preparing to introduce a new tax of 40% aimed at all electricity producers, assures the “Financial Times”.

Heading for a “deep recession”?

Another potential lever for action: freezing certain tax thresholds, particularly on income. With inflation at 11.1%, this means that households whose incomes have been lifted by wage rises, even below inflation, will automatically be thrown into the upper tax bracket: an increase in de facto taxes. Expected outcome according to Deutsche Bank: “A deep recession in 2023 with growth likely anemic until at least 2025”. The Bank of England is predicting an economic downturn that could be the longest the UK has ever seen.

Voters are still waiting to see the basis of a solid long-term plan

Russ Mould, analyst at AJ Bell, notes that while Jeremy Hunt can boast “a good start” with borrowing rates easing and a pound recovering, “voters are still waiting to see the fundamentals of “a solid long-term plan ‘.

For its part, the country’s main employers’ body, the CBI, is calling on the government to take “bold policy decisions” to ease immigration rules in the wake of Brexit and address the labor shortages that are holding businesses back. .

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