UK Chancellor Likely to Reveal Dramatic ‘Tax Hikes & Spending Cuts’ As Inflation Hits 41-Year High
British Chancellor of the Exchequer Jeremy Hunt leaves 10 Downing Street after being appointed by Prime Minister Liz Truss
Britain’s Chancellor of the Exchequer, Jeremy Hunt, is set to unveil a new budget amid a relentlessly growing cost of living crisis, with inflation scaling a 41-year high in October and consumer prices rising 11.1 percent, according to data released by the Office for National Statistics on 16 November.Tax hikes, slashed public spending and scaled-back government support for energy bills after April 2023 are tipped to feature in UK Chancellor of the Exchequer’s Autumn Budget, announced to Parliament on Thursday, the country’s media reported.The move will come in an effort to tackle an estimated £50Bln ($59Bln) budget shortfall, and after the Office for National Statistics (ONS) announced that inflation in the country had reached a new 41-year high of 11.1 percent. Amid a growing clamour for the British government to do more to help households whose budgets are being eroded by the cost of living crisis, with its staggering costs on food and energy.The panicked response to the £45Bln of unfunded, tax-slashing mini-budget of 23 September conceived by the previous Chancellor, Kwasi Kwarteng, brought the pound crashing to a new 37-year low against the dollar and, amid a succession of humiliating U-turns, catapulted Liz Truss from the Prime Minister’s office. Now, Jeremy Hunt, appointed after PM Rishi Sunak entered Downing Street, has vowed to heal public finances.
Energy Crisis in EuropeUK Police Brace for Surge in Crime & Civil Unrest Amid Soaring Energy Bills, Cost-of-Living Crisis4 September, 11:01 GMTAhead of the Autumn Statement by the Treasury, the PM had emphasized that the financial situation had stabilized and that the government was set to put “public finances on a sustainable trajectory.” Hunt has also hinted ahead of his budget statement that people in the UK would be “paying a bit more tax”. Here is what is expected to be laid out as part of a money-saving drive in the budget statement made by the Chancellor in Parliament.
Energy Support
The UK government’s support plan for energy bills is anticipated to be not nearly as generous as initially conceived during Liz Truss’s brief stint at 10, Downing Street.Previously, the “energy price guarantee” presupposed that a typical household using 12,000 kWh (kilowatt hours) of gas a year, and 2,900 kWh of electricity a year would have to pay no more than £2,500 on energy annually in line with the government’s Energy Price Guarantee. With the government’s intervention, originally scheduled to last two years, the guarantee would limit the price that suppliers could charge for each unit of energy. However, now, after April 2023 most households will face a much higher energy bill, as the Chancellor is expected to underscore the need to allow the energy price cap to rise from £2,500 to an estimated £3,000 to £3,100.
Windfall Tax
Hunt is believed to be mulling increasing the Energy Profits Levy, otherwise known as the windfall tax, on oil and gas giants from 25 percent to 35 percent until 2028. During his time as Chancellor, Rishi Sunak, under PM Boris Johnson, enacted the Energy Profits Levy (EPL) in May that added a 25 percent surcharge on oil and gas profits.A levy on firms generating electricity from wind and solar farms, as well as older nuclear plants, is also supposedly in the works, and is expected to reach an excess profits tax of about 40 -45 percent.
WorldUK Home Secretary Accuses Tory Rebels of Trying to Oust Truss After Kwarteng’s U-Turn on Mini-Budget5 October, 10:23 GMT
Stealth Taxes & Other Hikes
Hunt is believed to be ready to announce “stealth taxes”, which would involve freezing the thresholds at which people begin paying different rates of tax because more of their income will fall within a higher tax band (as a result of inflation and wage raises). This is likely to cover everything from income tax, national insurance, and inheritance tax to the pension lifetime allowance. As Chancellor, Sunak set in place a four-year freeze on tax thresholds, with the new plan now reportedly envisaging an extension of the freezes for a further two years, until 2027-28.Hunt is expected to lower the threshold at which people start paying the 45 percent top rate of income tax from £150,000 to £125,000. Along with expected raises in capital gains tax, dividend tax, and, maybe, council tax.
Bankers’ Bonuses Cap
Hunt is expected to lift the cap on bankers’ bonuses – a measure that his predecessor Kwasi Kwarteng had announced in late September.The City bonus cap was introduced by the EU after the 2007-8 financial crisis as part of a set of regulations known as the Capital Requirements Directive that came into force in 2014. The package included a rule that capped banker bonuses at two times their annual salaries. At the time, the banking sector’s “bonus culture” was faulted for prioritizing short-term profits over longer-term stability and incentivizing “risky behavior”. The idea to scrap the EU bonus cap had been floated in the UK back in June, with Labour leader Sir Keir Starmer slamming it as “pay rises for bankers, pay cuts for district nurses.”Another measure set to be announced is reportedly a delay to the introduction of the £86,000 cap on social care costs for two years, conceived under Boris Johnson. The reported delay, from October 2023 until 2025, would purportedly save close to £2Bln.
WorldUK Unions in Fury Over Plan to Scrap Banker’s Bonus Cap as ‘Millions Are Walloped by Soaring Costs’16 September, 09:16 GMTHunt’s Autumn Statement is expected to contain suggestions to slash public spending by about £25Bln to £30Bln. Cuts are anticipated to affect major infrastructure spending such as high-speed rail, whereas the National Health Service (NHS), on the contrary, is expected to get a budget boost. “We are taking difficult decisions to deliver strong public finances and help keep mortgage rates low, but our plan also protects our long-term economic growth. At the same time, we protect the vulnerable, because to be British is to be compassionate.,” Hunt stated earlier.Before his appearance in the Commons, Hunt vowed to be “honest about the challenges and fair in our solutions”.
WorldUK Heading Into Recession as Economy Shrinks in Third Quarter11 November, 15:42 GMTThe “entire approach is to bring down inflation”, a cited government source said ahead of the statement in parliament, adding:“If we enter a recession it will be driven by inflation and today it hit 11.1 percent. That stumps any prospect of economic growth. Until we get to grips with inflation we won’t be able to have long-term sustainable growth. Borrowing for tax cuts would only have added fuel to the fire. We are setting out a plan to get debt falling in the medium term and balance the books.”
