Nov. 17 (UPI) — British Treasury chief Jeremy Hunt outlined a $65 billion package of tax hikes and public spending cuts Thursday, saying the difficult moves were necessary as the country had lapsed into recession amid historic inflation and a continuing cost-of-living crisis.
In his Autumn Statement on Thursday before the House of Commons, Hunt said his emergency budget — which would be paid for in large part by a new windfall tax on energy company profits — would ultimately strengthen the economy and reduce debt, while also helping millions of struggling households pay their surging energy bills.
The plan will also add some extra cash to pensions and welfare benefits, keeping them on par with inflation that has racked the British economy all year before reaching a 41-year high of 11.1% in October, according to the Office for National Statistics.
The British government will also continue to make investments in new clean energy sources and infrastructure projects that will serve to move the country away from dependency on fossil fuels, Hunt said.
“It is a balanced plan for stability, a plan for growth and a plan for public services,” Hunt said. “It shows that you don’t need to choose either a strong economy or good public services.”
Facing increasing political pressure to resolve the crisis, Hunt said he will raise the windfall tax on the nation’s lucrative oil and gas industry from 25% to 35% over the next four years — assuring the government an extra $14 billion to help offset prices for weary consumers.
Minimum-wage earners will also see a boost in wages under Hunt’s plan, while the country’s biggest earners should expect to see their income tax bills go up in the coming year.
Electricity providers will be on the hook for a new 45% tax on profits, Hunt said, but public spending cuts were not expected to impact critical industries like healthcare and education.
Electric vehicles, however, will be slapped with a new excise tax after April 2025.
Hunt, the nation’s top economic policymaker, noted a report from the Office for Budget and Responsibility that showed Britain to already be in recession after the economy shrank 0.2% during the third quarter of 2022 (between July and September). A recession is defined as two consecutive quarters of decline in GDP.
Like most of Europe, Britain has been struggling under the weight of record inflation that has been largely due to Russia’s ongoing war in Ukraine and President Vladimir Putin’s continuing disruptions to world energy markets.
In response to rising inflation, the Bank of England has been steadily hiking interest rates to record levels throughout the year in an effort to tame consumer prices.
Prime Minister Rishi Sunak has been scrambling to find a way to balance the nation’s budget and stabilize the economy since taking over the government three weeks ago following the short-lived tenure of Liz Truss — who stepped down in October amid an uproar over her plan for $53 billion in unfunded tax cuts.
Sunak immediately scrapped Truss’s signature policy, but is now grappling with his own budget shortfall of at least $47 billion.
On Thursday, Hunt expressed optimism despite some daunting economic challenges ahead.
“There is a global energy crisis, a global inflation crisis and a global economic crisis. But today with this plan for stability, growth and public services, we will face into the storm. We do so today with British resilience and British compassion,” he said. “Because of the difficult decisions we take in our plan, we strengthen our public finances, bring down inflation and protect jobs.”
