The British government wants to save 55 billion pounds (65 billion euros) with tax increases and spending cuts. The country’s economy is in recession, said Treasury Secretary Jeremy Hunt on Thursday in London when his austerity budget was published in Parliament.
The painful measures are necessary to ensure financial stability after the recent turmoil. According to the Bank of England, Great Britain is at the beginning of a long recession. Inflation recently rose to 11.1 percent.
Hunt announced that it would freeze the amount of the tax credit for two more years until 2028. That means millions of people will move into higher tax brackets because of rising inflation and higher wages. In addition, the threshold for the top tax rate, which is 45 percent, is to be lowered and will in future apply to annual incomes of £125,140 (EUR 143,260) instead of the previous £150,000.
Hunt: “Trust doesn’t come for free”
“We will face the storm,” said Hunt. He spoke of difficult decisions that would ensure stability, reduce inflation and balance the national budget. This also includes significantly reducing public spending in some areas. For financing, the excess profit tax for energy companies will be increased from 25 to 35 percent. The Finance Minister also announced higher spending, for example for the ailing NHS health service and schools.
Great Britain is sitting on a mountain of debt of 2.45 trillion pounds (around 2.8 trillion euros). With his restructuring course, Hunt wants to ensure that investors’ lost confidence returns and that the state’s financing costs are kept in check. “Trust doesn’t come for free,” Hunt said. “We Conservatives are not leaving the debt to the next generation.”
The finance minister said the UK economy was already in recession, according to the UK’s independent budget authority. In 2023, economic output is expected to shrink by 1.4 percent. The central bank fears that the recession could drag on for years.