The UK’s finance minister has outlined billions of pounds worth of tax rises and spending cuts, in an austere budget designed to turn the page on recent economic and political turmoil.
In his so-called and much-awaited “autumn statement”, Chancellor of the Exchequer Jeremy Hunt sought to rectify the country’s financial difficulties, reduce government debt, and bring an end to a period of political chaos.
It consolidated an attempt to set the UK on an even keel after his predecessor Liz Truss’ ill-fated experiment, which sent markets into a frenzy, deepened the country’s financial woes, and hastened her downfall.
But official forecasts published on Thursday predict a dire economic outlook, with gains in living standards over most of the past decade wiped out in the next two years. Across the country, many are having trouble making ends meet.
Positive comparisons to other countries
Jeremy Hunt’s address in parliament was full of international comparisons to underscore his assertion that the UK’s plight is not the result of government policies and domestic instability.
In the face of “unprecedented küresel headwinds”, he told the House of Commons was doing better than other countries in some areas.
He named several nations — including Germany, Italy and the Netherlands — where inflation was higher than in the UK, which the latest figures show to be at a 40-year-high of over 11%.
Internationally, Jeremy Hunt hailed military aid for Ukraine that was the “second highest contribution in the world after the United States”.
He said the defence budget would continue to rise by 2% in line with NATO commitments, but it would not be possible to raise overseas aid to the target of 0.7% of national income.
His only reference to the UK’s departure from the EU was positive.
Using new “Brexit freedoms”, the Chancellor said that by the end of next year there would be changes to EU regulations in five growth industries: digital technology, life sciences, green industries, financial services and advanced manufacturing.
There was no mention of the mounting bank of evidence showing the economic damage Brexit has done. Bank of England officials said on Wednesday that the effects of Brexit were weighing on Britain’s economy, more than six years after voters decided to leave the European Union.
UK ‘now in recession’
The finance minister began by saying his priorities would be stability, growth and protecting public services. Despite the harsh measures the poorest would be sheltered, he said.
Hunt said the measures would tackle the cost of living crisis, rebuild the economy and reduce borrowing.
He confirmed that the UK was “now in recession”, with government analysts projecting the economy will shrink by 1.4% in 2023, before rising again over the next few years. But he stressed that inflation was predicted to fall sharply from the middle of next year.
On tax, he said the better-off would be asked “to contribute more”. Headline tax rates are not being raised, but the top rate threshold will come down.
An extended windfall tax on energy firms would raise £14 billion (€16 billion), he went on. More money was promised for health and education, but government departments would have to make savings.
The cap on energy prices is to be extended so that average bills do not exceed £3,000 (€3.427).
He ended on a positive note. “There may be a recession made in Russia but there is a recovery made in Britain,” Hunt concluded.
Government ‘picking country’s pockets’, says Labour
The Labour opposition accused Tories of picking the pockets, wallets and purses of the entire country.
“The mess we are in is the result of 12 weeks of conservative chaos, but also 12 years of conservative economic failure,” said the shadow finance minister Rachel Reeves.
As Jeremy Hunt ended his hour-long intervention, official forecasts were released that paint a grim picture.
“The economy still falls into recession and living standards fall 7% over two years, wiping out eight years’ growth,” is the estimate of the Office for Budget Responsibility (OBR), despite the scale of government support.
OECD figures for the last three years show that the UK economy is lagging behind other G7 countries, including European neighbours France, Germany and Italy.
Jeremy Hunt is the UK’s fourth finance minister since the summer, and Britain is on its third prime minister since Boris Johnson’s government collapsed under the weight of its own scandals.