UK: Officials say decisions on tax raises and spending cuts are sober
Author : Saipriya Iyer | Published Date : 2022-10-29
UK chancellor Jeremy Hunt and PM Rishi Sunak are reportedly experiencing sober decisions on possible tax rises and spending cuts, as per officials.
They were informed in a meeting on Thursday that economic expansion is anticipated to be far slower than the most recent independent forecast. Hence, they now have a larger financial gap to fill.
The plans' disclosure has been delayed by almost two weeks, to November 17.
The amount that the chancellor and PM will need to find in the budget upcoming month was not provided by the Treasury, but it is estimated to be at least £50 billion ($57.5 billion).
Various sources claimed that this was necessary because, if the economy did not expand as much as anticipated, the government needs headroom in addition to reducing its existing debt.
Government borrowing costs have recently decreased, but officials cautioned Hunt and Sunak that they are still very high given the increase in global interest rates. For instance, the yield on 10-year UK government debt has increased by slightly over 10 basis points since the mini-budget.
The PM and chancellor concurred that a buffer is necessary, which entails a larger repair work than originally estimated, to ensure that the package is believable to financial markets.
Following former chancellor Kwasi Kwarteng's mini-budget, government borrowing costs increased, causing the sterling to drop to a record low versus the dollar last month.
As soon as Kwarteng promised significant tax cuts without indicating exactly how they would be compensated for, the financial markets went into meltdown.
Fortunately, the government borrowing costs have returned to where it was before the mini-budget. After Sunak was elected prime minister, while the dollar declined, the pound also increased.
In his first appearance as PM, Sunak promised to address the failures made by his predecessor.
Hunt, who took over as chancellor when Kwarteng was removed by Truss, has already reversed nearly all his predecessor's tax reductions.
But to keep the UK's debt under control, he still must find billions of pounds in savings.
Source credit: https://www.bbc.com/news/uk-politics-63421790
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Saipriya Iyer . .
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