“Stability”, ” growth “ and ” public services “ : these were the watchwords of the British finance minister, Jeremy Hunt, who unveiled, on Thursday 17 November, an austerity budget to restore the finances of the United Kingdom. This provides 55 billion pounds of tax increases and cuts in public spending, although 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, before Parliament. “The UK, like other countries, is now in recession” according to the OBR, the public budget forecasting body, argued the minister, 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 financial turmoil of the previous government, tops the list, and with it the fight against inflation, “which affects the poorest the most”.
According to him, the 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, aggravated by “the energy crisis generated by [l’invasion de l’Ukraine par] Russia “.
Reassuring the markets after Liz Truss’ “mini-budget”
By listing the set of measures of “consolidation” budget of £55 billion in total, he mentioned lowering the top income tax threshold and raising the tax on the windfall income of oil and energy giants, boosted by the surge in the energy market .
The new finance minister had the daunting task of reassuring the markets scalded by the massive and ill-prepared budget announcements of the previous prime minister, Liz Truss, which sent the British markets swaying and the cost of the country’s debt soar.
The minister was careful to rely on figures from the OBR, the absence of which during the disastrous “mini-budget” of the previous government had contributed to causing panic in the markets. Mr. Hunt has already erased most of the measures that were then announced by the short-lived Liz Truss, who wanted to proceed with massive energy aid and all-out 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 recession that is beginning could last up to two years according to the Bank of England, even if, for this year, the OBR predicts growth of 4.2%.
Apart from Covid-19 and the war in Ukraine, the United Kingdom 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, which contributes to the inflation and loss of productivity.
London will increase its exceptional tax on the profits of energy giants from 25% to 35%, and will extend it for three years, until 2028. Mr Hunt also announced “a new temporary tax of 45% on electricity producers”.