The government presents a new austerity budget

“Stability”, “growth” and “public services” : these were the watchwords of British Chancellor of the Exchequer, Jeremy Hunt, who on Thursday 17 November unveiled an austerity budget to restore Britain’s finances. This provides £55 billion in tax increases and cuts in public spending, even though the country has already entered recession.

“It’s a balanced stability plan”, “I tried to be fair by asking those who have more to contribute more”argued Mr Hunt in a sober tone to Parliament. “Britain, like other countries, is now in recession” according to the OBR, the government budget forecasting body, the minister claimed, and its gross domestic product will fall a further 1.4% in 2023. Jeremy Hunt revealed “three priorities: stability, growth and public services”. Stability, after the previous government’s financial turmoil, tops the list, and with it the fight against inflation, “which affects the poorest the most”.

According to him, OBR has “confirmed that global factors are the main cause of inflation, with most countries still dealing with the fallout” of the Covid-19 pandemic, exacerbated by “the energy crisis generated by [l’invasion de l’Ukraine par] Russia”.

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Insuring the markets on Liz Truss’ “mini-budget”

By listing the set of goals of “consolidation” budget of £55bn in total, he mentioned lowering the top income tax threshold and raising tax on the windfall of oil and energy giants, boosted by the rise in the energy market.

The new Chancellor of the Exchequer had the daunting task of calming markets scorched by former Prime Minister Liz Truss’s massive and ill-prepared budget announcements, which sent UK markets reeling and the cost of the country’s debt rising.

The minister was careful to rely on figures from the OBR, whose absence during the previous government’s disastrous “mini-budget” had helped panic the markets. Mr. Hunt has already scrapped most of the measures then announced by the short-lived Liz Truss, who wanted to continue with massive energy subsidies and across-the-board tax cuts.

A recession that could last two years

These announcements come as the economy has already contracted by 0.2% of gross domestic product in the third quarter. The incipient recession could last up to two years, according to the Bank of England, although the OBR is forecasting growth of 4.2% for this year.

Apart from Covid-19 and the war in Ukraine, the UK is suffering from the impact of Brexit, which is crippling trade with its large European neighbor and hampering the hiring of workers from the continent, contributing to inflation and loss of productivity.

London will raise its extraordinary tax on energy giants’ profits from 25% to 35% and extend it for three years until 2028. Hunt also announced “a new temporary tax of 45% on electricity producers”.

Also read: Article reserved for our subscribers In the United Kingdom, the property market tumbled after the rise in interest rates

The world with AFP

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