Britain’s Treasury Secretary announces tax hikes and spending cuts, saying the country is in recession

Treasury Secretary Jeremy Hunt unveiled a sweeping £55bn ($66bn) fiscal plan in his much-anticipated first autumn statement.

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LONDON — The UK government on Thursday unveiled a sweeping £55 billion ($66 billion) fiscal plan to plug a gaping hole in public finances and restore Britain’s economic credibility even as the country slides into recession equipment.

Treasury Secretary Jeremy Hunt outlined around £30 billion in spending cuts and £25 billion in tax hikes in his much-anticipated first autumn statement.

Measures included a six-year freeze on income tax thresholds and a cut in the income tax ceiling to £125,000 – steps that directly counter the big cuts announced in September disastrous mini-budget.

“Unfunded tax cuts are just as risky as unfunded spending,” Hunt told the House of Commons.

Hunt said the measures would reassure markets that the government and Bank of England are now working in “lockstep”.

“We need fiscal and monetary policy to work together,” he said. “That means the government and the bank are working in lockstep. It means, in particular, giving the world confidence in our ability to pay our debts.”

A recessionary financial plan

The measures will add to the financial hardship of millions of Britons as they confront the country’s worst cost-of-living crisis in decades and its longest recession.

However, Hunt said they were necessary to limit them 41 years of high inflation and restore the UK’s reputation; describe the plan as the “ultimate growth strategy”.

We must continue a relentless fight to bring down (inflation), including an unwavering commitment to rebuilding our public finances,” Hunt said.

Other measures announced included a 10% increase in state pensions, benefits and tax credits – in line with September’s inflation figure – and an increase in the national living wage to £10.42 an hour for people aged 23 and over.

The Treasury Secretary also confirmed that the energy industry faces an expanded windfall tax of 35% versus 25%.

Thursday’s statement was accompanied by long-awaited forecasts from the UK’s independent Office for Budget Responsibility (OBR), which painted a bleak economic picture for the UK.

Hunt said the forecasts showed the UK is now in recession but that the government’s plan will ensure the downturn is shallower and unemployment lower than originally forecast.

A big test for the government

The UK’s new strategy sets the tone for Prime Minister Rishi Sunak’s term in office, who is ushering in an era of austerity and dwindling support for the Conservative Party.

It also marks a pivotal moment for Hunt, which it was installed last month to restore Britain’s credibility after its now infamous predecessor, Kwasi Kwarteng Mini budget of unfunded tax cuts unleashed market chaos and emergency intervention.

Although Hunt’s boss at the time Liz Truss has resigned In a short time – he became Britain’s shortest-serving Prime Minister – he was retained by his successor, Rishi Sunak, to provide stability after months Political rumors.

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Shadow Finance Secretary Rachel Reeves said on Thursday the new plans will leave the UK worse off than it was earlier this year.

“Here we are at the end of 2022, three prime ministers, four chancellors and four households later,” Reeves said. “And where are we? In a worse place than when we started the year.”

The UK is the only country in the Group of Seven (G7) that has yet to return to its pre-pandemic size after suffering a decade of near-stagnant income growth.

That Bank of England warned against it the country is now facing its longest recession since records began a century ago.

Official data released on Friday showed that the economy down 0.2% in the third quarter of 2022. A second consecutive quarter of negative growth would indicate that the UK is in a technical recession.

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