A £55bn gap… Are tax hikes reviving UK recession?
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Britain’s Chancellor of the Exchequer, Jeremy Hunt, is trying to keep any recession as short as possible in his new financial plan, as Hunt seeks to restore Britain’s credibility among investors in its first budget since Rishi Sunak replaced Liz Terrace as Prime Minister last month, on promises to make her to undo policy mistakes The economy, led by a series of unfunded tax cuts.
Hunt plans to plug a £55 billion ($65.1 billion) hole in the UK budget by freezing caps and increases on income taxes, public insurance, inheritance taxes and pensions for another two years.
Jeremy Hunt said the new financial plan will aim to make any recession as short as possible.
“I want to make sure that if we do go into recession, this recession is as short and shallow as possible,” he added in an interview with Sky News on Sunday.
The UK economy contracted in the third quarter for the first time since the first quarter of 2021.
Bloomberg News reported that Hunt will announce his plan on November 17 as he seeks to plug a budget deficit estimated at more than 50 billion euros ($56 billion).
Reports that Hunt would announce higher income tax returns, windfall taxes for energy companies and an inheritance tax have sparked panic within the Conservative Party.
Hunt explained that spending cuts and tax increases are needed to reduce inflation and control the rising national debt.
On Saturday, Hunt said he needed to raise taxes in this week’s budget to help shore up public finances and ease a possible prolonged recession, according to The Sunday Times.
Terrace’s “mini-budget” in September led to a bond market collapse that increased borrowing costs and eventually forced her to resign.
“This will be a great moment of choice for the country and we will put the people at the forefront of ideology,” Hunt said in an interview with the Sunday Times.
Along with deeper spending cuts, Hunt and Sunak are trying to prepare the Conservative Party for tax hikes that could reignite tensions within the party that forced Truss to resign and allowed Sunak to become Britain’s fourth Tory prime minister since 2016.
i will be honest
Hunt also plans to halve the capital gains tax credit and lower the threshold for paying the additional income tax rate from EGP 150,000 to EGP 125,000 annually.
“What I can promise people is that I’ll be honest about the scale of the problem and fair in the way I’m dealing with these issues, and yes that means people with higher incomes will be bearing the brunt.” , Hunt said.
Thursday’s budget will include forecasts similar to those of the Bank of England, which earlier this month warned the country was facing a long recession.
“I think it’s very likely … the question isn’t really whether we’re in a recession, it’s what we can do to make it shorter and less profound,” Hunt said in the interview.
He added that he would seek to work with the Bank of England to control inflation and global interest rate hikes that are putting pressure on the UK economy.
“The first thing I can do is help the Bank of England bring inflation down,” he said.
He added that he wants to give businesses and families the confidence to invest and spend.
“If I can give them confidence that we have a plan to fight inflation and restore stability to the economy, that would be a success,” he said.
The newspaper said Hunt is likely to spend just £20bn to extend the ceiling on the state’s energy bills by a further six months after April, a third of its estimated £60bn cost in the first six months, meaning the bills are likely to fall will rise .
According to the newspaper, Hunt is also considering a multibillion-pound aid package to protect pensioners and unemployment benefit recipients from rising utility bills.
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