[Economics] British finance minister: We have to raise taxes to fix the economy

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Hunt and Sunak are trying to prepare the Conservative Party for tax increases that could reignite the tensions that forced Truss to resign from it.

 

 

Britain's Chancellor of the Exchequer Jeremy Hunt has said he will have to raise taxes in his budget plan this week in order to fix public finances and ease a possible prolonged recession, the Sunday Times newspaper reported.

Hunt is trying to restore Britain's credibility among investors in its first budget plan since Rishi Sunak replaced Liz Terrace as prime minister last month, with a pledge to undo its economic policy mistakes, led by a series of unfunded tax cuts.

Terrace's "mini-budget" in September led to a bond market slump, driving up borrowing costs and eventually forcing her to resign.

"This will be a huge test moment for the country, and we will put people at the forefront of ideology," Hunt said in an interview with the Sunday Times on Saturday.

In addition to making deeper spending cuts, Hunt and Sunak are trying to prepare the Conservative Party for tax increases that could reignite the tensions in the party that forced Truss to resign and allowed Sunak to become Britain's fourth Tory prime minister since 2016.

The newspaper said Hunt plans to plug a 55 billion pound ($65.1 billion) gap in the British budget by freezing limits and increases for income tax, public insurance, inheritance tax and pensions for another two years.

Those with big incomes will bear the burden
The newspaper stated that the British finance minister intends to halve the tax exemption for capital gains tax, and reduce the limits for paying the additional rate of income tax from 150,000 pounds to 125,000 pounds annually.

"What I can promise people is that I will be honest about the scale of the problem, and be fair in the way I handle those problems," Hunt said.

Thursday's budget plan will include forecasts similar to those of the Bank of England, which warned earlier this month that the country faced a prolonged recession ahead.

"I think it's very likely," Hunt said in the interview. "The question is not really whether we're in a recession, but what we can do to make it shorter and less profound."

He added that he would seek to work in cooperation with the Bank of England to control inflation and the global rise in interest rates, which increases pressures on the British economy. "The first thing I can do is help the Bank of England bring down inflation," he added.

 Confidence and stability
The British minister stressed that he wanted to give confidence to companies and families to invest and spend, and said, "If I can give them confidence that we have a plan to tackle inflation and restore stability to the economy, that would be an achievement."

The newspaper said Hunt is likely to commit only 20 billion pounds to extending the cap on government energy bills to another 6 months after last April, which is a third of his estimated 60 billion pounds in the first six months, which means it is likely to rise Invoices.

The newspaper added that Hunt is considering a multibillion-pound support package to protect pensioners who receive unemployment benefits from rising electricity bills.

Britain's finance minister has warned he will make "surprising" decisions after the economy contracts, in what is feared to be the start of the longest recession ever.

Hunt also warned of a "difficult road" for the UK, where GDP contracted by 0.2%.

He said he would work to make a possible recession "weaker and faster" in his fall budget, which he will unveil on Thursday.

He added in a tweet to him on Twitter that Britain is not immune from global challenges of high inflation and slow growth due to the Russian war on Ukraine.

 

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