Chancellor of the Exchequer Jeremy Hunt has unveiled an emergency budget, containing tens of billions in spending cuts and tax hikes as the country’s new government seeks to restore fiscal integrity and restore the country’s lost finances.
Hunt on Thursday presented a plan to tackle the economic crisis in a speech to the House of Commons, saying it prioritized “sustainability, growth and public services”.
He said more than half of the 55 billion pound ($65bn) economic recovery would come from spending cuts.
“On taxes, I have tried to do things fairly by following two main principles: first, we ask those who have more to pay more; and secondly, we avoid tax hikes that hurt growth,” Hunt said.
He reduced the threshold at which 45 percent of personal income tax is paid from 150,000 pounds (about $178,500) to 125,140 pounds (about $148,900).
Those who earn 150,000 pounds (about $178,500) or more pay more than 1,200 pounds (about $1,400) a year.
“I am currently saving personal income tax, rate increases, national insurance and inheritance tax for the two years leading up to April 2028,” he said.
“The distribution fee will be cut from 2,000 pounds [about $2,400] up to 1,000 pounds [about $1,200] next year and then up to 500 pounds [about $600] from April 2024. The annual tax credit will be cut from £12,300. [about $14,600] up to 6,000 pounds [about $7,300] next year and then up to 3,000 pounds [about $3,650] from April 2024.”
Hunt also said his government would increase taxes on oil and gas companies and increase them on electricity companies.
The levy will increase to 35 percent from the current 25 percent. This also applies to electricity producers with a tax of 45 percent from January 1.
Hunt said the country’s health system would receive 8 billion pounds ($9.5bn) in funding over two years, which he said health officials had said would help meet critical needs.
He also said he would increase the National Health Service’s budget over the next two years by an additional 3.3 billion pounds ($3.9bn).
“The chief executive of the NHS, Amanda Pritchard, has said that this should provide enough funding for the NHS to meet its needs,” Hunt said.
He said there would be an increase in funding for the social care sector to 2.8 billion pounds ($3.3bn) next year and 4.7 billion pounds ($5.6bn) the year after.
He added: “I can announce today that next year and the year after, we will invest another 2.3 billion dollars. [$2.7bn] per year in our schools.”
The end of Trussonomics
Britain’s stock market fell 0.6 percent and the pound fell against the US dollar before Hunt’s announcement.
Traders fear the budget will exacerbate the UK’s financial crisis after inflation rose to 1981 percent of 11.1% in October, as the economy began to collapse.
The emergency budget review aims to restore the government’s financial and political credibility after former Prime Minister Liz Truss announced 45 billion pounds ($53bn) in unpaid taxes that undermined business confidence, sent the currency into a weaker US dollar and triggered an emergency between . bank intervention.
Truss was forced to resign six weeks after taking up the post.
The budget comes against a backdrop of challenges, with the war in Ukraine, the earthquakes following the COVID-19 pandemic and the financial crisis following Britain’s exit from the European Union all weighing on the UK economy.
Economic growth fell by 0.2 percent in the third quarter, and the Bank of England predicted a two-year recession.
The government is also paying the cost of the tax cuts that Truss announced, which damaged the UK’s financial reputation and boosted government borrowing.
Hunt and Prime Minister Rishi Sunak, who replaced Truss as leader of the Conservative Party and prime minister last month, have reversed many of Truss’s policies as he pledged to pay down the government’s debts and start reducing the debt built up over the past 15 years.
UK public debt rose to around 83 per cent of the economy in 2017 from 36 per cent in 2007 as the government bailed out banks and struggled to stimulate the economy.
A decade of budget austerity began to ease the burden as the COVID-19 pandemic and the war in Ukraine pushed the debt to 98 percent of gross domestic product (GDP).
That is the highest since 1963, when Britain was recovering from World War II.