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Britain to announce heavy tax increases and budget cuts

Britain to announce heavy tax increases and budget cuts

Britain to announce heavy tax increases and budget cuts

A women shopping for food in London

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  • Chancellor of the Exchequer to assert that his plan “protects our long-term economic prosperity”.
  • The package is expected to cost £54 billion ($64 billion), Treasury estimates.
  • It comes as UK inflation hits a 41-year high above 11 percent.
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Britain is scheduled to announce heavy tax increases and budget cuts on Thursday, which could exacerbate the cost-of-living issue for millions of people in the recession-bound economy.

A day after official data showed UK inflation soaring to a 41-year high above 11 percent, finance minister Jeremy Hunt will usher in a new period of austerity following the disastrous and brief administration of prime minister Liz Truss.

The chancellor of the exchequer will assert that his plan “protects our long-term economic prosperity” while demonstrating “compassion” for the most vulnerable.

The Treasury expects him to tell parliament, “We aren’t immune to these global headwinds, but with this plan for stability, growth, and public services, we will face into the storm.”

After Truss unveiled a package of unfunded tax cuts that sparked fear in the financial markets, Hunt and Prime Minister Rishi Sunak insist stern action is required.

“Tackling inflation is my absolute priority and that guides the difficult decisions on tax and spending we will make on Thursday,” Hunt said, with the Treasury estimating that the package will cost £54 billion ($64 billion), as reported by Britain’s Press Association.

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Hunt compared himself over the weekend to Ebenezer Scrooge from Charles Dickens’ holiday classic “A Christmas Carol,” but maintained that his method will “make sure Christmas is never canceled.”

It comes as workers in a variety of sectors across the United Kingdom have gone on strike this year to demand pay increases to compensate for soaring inflation.

State-employed nurses and firefighters might be the latest groups to engage in industrial action, joining rail employees and postal workers who have also gone on strike this winter.

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Governor of the Bank of England Andrew Bailey informed MPs on Wednesday that he would not accept a salary increase this year.

The head of the central bank, who makes approximately £575,000 per year, stated, “I would politely decline as I have done before.”

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According to the Bank of England, Britain is likely already in recession, as its economy contracted in the third quarter and is expected to do so again in the final three months of the year.

The bank, which is increasing interest rates to tackle skyrocketing inflation, has issued a warning that the British economy could face a record-long recession until mid-2024.

Alongside the tax and spending plans, the government will update its growth and inflation estimates for the United Kingdom on Thursday, which are expected to highlight the bleak future prognosis.

Hunt has already begun overturning Truss’s heavily criticized budget by ending a freeze on domestic fuel rates, which have soared in large part due to Russia’s invasion of Ukraine.

In addition to helping to stabilize markets, he reversed her plan to reduce taxes on corporate earnings.

According to reports, the chancellor will go further on Thursday by freezing income tax rate thresholds, which will force more individuals into higher tax bands.

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Hunt has alluded to increasing municipal levies and slashing departmental spending.

The government is poised to increase a windfall tax on oil and gas firms, whose earnings have soared as a result of the Ukraine conflict, in order to assist the poorest with their soaring energy costs.

It is rumored that Hunt is also considering a windfall tax on corporations that generate power, whose profits have similarly skyrocketed this year.

The Ukraine conflict has significantly contributed to global inflation reaching its greatest levels in decades. As a result of pandemic-induced supply constraints, prices have risen.

Brexit is also impacting the British economy, Bailey and fellow BoE rate-setter Swati Dhingra warned on Wednesday.

Dhingra told the Treasury committee of the House of Commons, “It’s undeniable now that we’re seeing a much bigger slowdown in trade in the UK compared to the rest of the world.”

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