While Truss had just announced huge tax cuts and big investments, Sunak seems to be doing the opposite. Despite the economic crisis and skyrocketing inflation in the country, Sunak will announce severe cuts and higher taxes.
Finance Minister Jeremy Hunt will outline budget plans to parliament later today. Hunt could announce £60bn, the equivalent of €67bn, in tax increases and cuts. He had previously reversed nearly all of Truss’s tax cuts. Hunt said that tackling high inflation was his top priority and that public debt must be reduced. Sunak also said that economic problems are the top priority for his government.
Shaky economy
UK correspondent Lia van Bekhoven sees the British economy faltering. This could be the longest recession ever. And this against the backdrop of more strikes and a public sector that is visibly and palpably collapsing. Plans will therefore be something that will not make anyone happy.’
And that dissatisfaction will then be very big, is the expectation. The Conservative Party and Britons have been warned for weeks to prepare for a very painful time. However, Sunak cannot ignore it, because the economy is in very bad condition and even worse than comparable countries,’ says Van Bekhoven. The EU economy has also had to cope with the pandemic and the aftermath of the war in Ukraine. But most economies have now recovered from the coronavirus.”
Brexit and poor healthcare
This is not the case for the British, the correspondent notes. ‘The important reasons why this is not the case have to do with Brexit, of course, and the decline in the job market after the corona virus. Economists have spent months investigating why people don’t work. Many workers have taken early retirement following the pandemic, but what is exceptional is that many Britons are staying at home because they are long-term and sometimes chronically ill. There have never been so many before.’
According to Van Bekhoven, this is mainly due to problems in the health sector. “There are millions of people on the waiting list, more than ten percent of the population. Physical and mental ailments are also getting worse. This is one reason why the British economy is not recovering.’
Hunt also comes with new forecasts for the economy and inflation. It was announced on Wednesday that UK inflation had risen to over 11% in October, the highest level in more than forty years. The British economy contracted in the third quarter and the Bank of England (BoE) expects a contraction in the fourth quarter as well. This would put the UK into a recession.