It is simply called “Autumn Statement”. But what the British Treasury Secretary Jeremy Hunt has proposed could become a winter bomb for government and consumers. For Hunt, it’s about nothing less than saving the local economy. In any case, fears of a long-lasting recession, rampant inflation and high energy costs are increasing the pressure. Because of the disastrous financial policy of short-term Prime Minister Liz Truss, Hunt and Prime Minister Rishi Sunak now have to calm the markets. Consumers pay the bill, as criticized by the opposition.
His priorities are “stability, growth and public services,” Hunt said in the London House of Commons. With tax increases and spending cuts totaling 55 billion pounds (62.9 billion euros), he wants to balance public finances, calm the markets and get inflation under control. At the same time, Hunt announced more spending on the ailing NHS health service and schools. Pensions are set to rise in line with inflation and the minimum wage by almost 10 per cent to £10.42 an hour.
Increasing pressure on consumers
But the pressure on consumers is actually increasing, as economists emphasize. The head of the Resolution Foundation think tank, Torsten Bell, referred to estimates by the supervisory authority Office for Budget Responsibility (OBR) that household incomes will fall by seven percent in 2022 and 2023. In addition, millions of people will have to adjust to further rising energy bills if the government reduces its support from April 2023. Added to this are higher taxes for millions. Hunt lowers the threshold above which the top tax rate of 45 per cent must be paid from £150,000 to £125,140. Above all, however, he freezes the tax allowances for two more years until 2028 – because of rising inflation and wages, many people will slide into higher tax brackets.
The situation is grim. The UK is already in recession, Hunt said, citing an OBR forecast. For the coming year, experts expect the British economy to shrink by 1.4 percent. Inflation was recently 11.1 percent, the highest it has been in 41 years. In numerous sectors, workers are on strike for higher wages, and the strikes are having a severe impact on the economy, as the statistics office recently determined.
Early autumn statement
The fall statement was originally scheduled for November 23, but was then brought forward to October 31. The financial policy plans of short-term Prime Minister Liz Truss had triggered severe turbulence on the financial markets. Truss wanted to slash taxes radically and fund that expected cost of tens of billions of pounds only with new debt. Hunt quickly cleaned that up. But business confidence is still low. Truss successor Rishi Sunak admitted that it is primarily about meeting market expectations.
The pressure on Hunt is correspondingly high. It will be exciting to see whether his conservative parliamentary group will follow suit. Because there is currently a fragile peace between Sunak and the confidants of his predecessor Truss. Many conservatives are extremely critical of the tax increases, which will also hit energy companies with an increase in the excess profit tax. The tax burden is already higher than it has been for 70 years.
Already lost in opposition
Hunt has already lost to the opposition. The fact that he primarily blamed the economic crisis triggered by the Russian war against Ukraine caused outrage. It is the Tories who have destroyed the economy in the twelve years of their government, said financial politician Rachel Reeves from the Labor Party, comparing the ruling party to pickpockets. High-earning bankers whose bonus payments will be removed and wealthy foreigners who do not have to pay tax on their income in the UK would get away with it, while hard-working people would have to foot the bill, Reeves criticized.
In polls, Labor is well ahead of the Tories and could head the government after the elections planned for 2024. But then the Social Democrats are threatened with a trap that Hunt set for them. The Chancellor of the Exchequer announced on Thursday that government spending should only increase by 1 percent a year in real terms, compared to 3.7 percent at the moment. But that only applies from 2025 – after the election.
