The government of the new British Prime Minister Rishi Sunak is going to cut public spending and raise taxes significantly to improve the finances of the United Kingdom.
Chancellor of the Exchequer Jeremy Hunt told parliament in his “Autumn Statement” that the total amount involved is £55 billion, the equivalent of almost €63 billion.
Sunak has been prime minister for three weeks and succeeds Liz Truss, who resigned because of the huge fuss over her controversial tax plans in the Conservative Party. According to Hunt, taxes will be increased by more than £24 billion, including a tax increase for middle-income earners.
However, the income threshold for the highest tax rate will also be lowered. In addition, there are changes to the dividend tax, and energy companies will pay more tax on high profits.
At the same time, more than £30 billion will be cut in spending. The budget for the national health service NHS remains unaffected. Hunt had previously reversed the tax cuts planned by Truss. He spoke of “painful measures” needed to ensure financial stability after the recent turmoil.
The minister also came up with new forecasts for the economy. He expects the British economy to shrink by 1.4 percent next year. A contraction was already visible in the third quarter due to high inflation and high energy costs.
Truss was prime minister for only a month and a half and resigned in October after the great unrest in the financial markets over her controversial budget plans. She wanted to borrow a lot of money for those plans, which threatened to increase the budget deficit even further.
The British central bank even had to intervene in the financial markets because the pound took a nosedive, and yields on British government bonds skyrocketed. Truss had previously fired her Finance Minister, Kwasi Kwarteng.