Unprecedented budget tightening against a gloomy economic outlook: On Thursday, November 17, the British Prime Minister, Rishi Sunak, and his Chancellor of the Exchequer, Jeremy Hunt, presented a particularly bitter “autumn budget” to the British people. It is true that Hunt has carefully avoided talking about austerity, but with £55 billion (€63 billion) in planned savings over the next five years, more taxes and limited public spending, the potion is hard to swallow for individuals and businesses. This is all the more so as the country is heading into recession and, according to the gloomy forecasts of the Office for Budget Responsibility (the national budget forecasting agency), British households will become poorer than at any time in six decades: their income will fall by 7 % over the next two years, erasing all their gains from the last eight years.
Why is the UK choosing such a remedy when the other European economies are instead attempting recovery plans to counter an economic downturn linked to the war in Ukraine and the consequences of the pandemic? Let’s take a step back: just two months ago, as part of an aptly named “mini-budget”, the UK government announced huge tax breaks for the wealthiest households (around £45 billion in tax cuts), funded by public debt . Markets were suddenly shaken: the pound fell against the dollar, the price of British government debt skyrocketed, and so did interest rates on personal mortgages.
“Operation rescue” of the economy
The Chancellor of the Exchequer, Kwasi Kwarteng, was replaced in mid-October by Jeremy Hunt, 56, a former health minister of Theresa May, known for his calmness and seriousness. Prime Minister Liz Truss did not resist much longer: she resigned on October 20 and the very pragmatic Rishi Sunak, 42, former Chancellor of the Exchequer to Boris Johnson, succeeded her in Downing Street five days later. Since then, almost all mini-budget measures have been canceled, and the Sunak-Hunt tandem has promised to ” correct the mistakes “ by their predecessors to restore the country’s reputation for fiscal seriousness. Priority is now given to financial stability, to reducing the share of debt in national gross domestic product and to the fight against inflation (it reached 11.1% over a year in October).
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