UK announces govt spending cuts, tax hikes

Budget to raise extra 24 billion pounds in tax to help fight 'global headwinds'

Hot on the heels of the United Kingdom's inflation rate hitting a 41-year high of 11.1 percent, the nation's finance minister, Chancellor of the Exchequer Jeremy Hunt, unveiled a budget on Thursday aimed at restoring stability.

Hunt's budget, officially termed his autumn statement, called for around 30 billion pounds ($35.6 billion) of government spending cuts and 24 billion pounds of additional taxes and was aimed, he said, at closing a spending gap in the government's accounts and avoiding additional national debt.

Hunt told lawmakers the UK has been dealing with "unprecedented global headwinds" and, with the cost-of-living crisis continuing, "families, pensioners, businesses, teachers, nurses, and many others "are concerned about the future.

"So, today, we deliver a plan to tackle the cost-of-living crisis and rebuild our economy," he said.

Hunt, who replaced previous chancellor Kwasi Kwarteng after his disastrous mini-budget in September, said several things have hurt the economy, including the high cost of energy triggered by shortages attributed to the Russia-Ukraine conflict, and the fight against the novel coronavirus pandemic. But he insisted, despite official forecasts that the economy will shrink by 1.4 percent next year and news the nation is in recession, that the government will "protect the vulnerable" because "to be British is to be compassionate and this is a compassionate government".

He said his budget was also aimed at promoting "stability, growth, and public services".

Included in the budget was a freeze on income tax thresholds, which, because of fast-rising wages triggered by high inflation, means millions more people will pay additional income tax. Hunt said the change means the UK's income tax burden as a proportion of national income will go up by around 1 percent during the next five years.

The chancellor also lowered the threshold at which the UK's highest earners must pay tax at the 45 percent rate, from 150,000 pounds to 125,140 pounds a year.

He also said he will collect more tax from energy companies, which have enjoyed record turnovers because of the high cost of fuel, with the UK's windfall tax set to rise from 25 percent to 35 percent. He said the UK will also save money by cutting the amount it spends on overseas aid, with it lowered from 0.7 percent of GDP to 0.5 percent.

The government will also reduce the support it gives households for energy bills, which are set to rise in April from 2,500 pounds to 3,000 pounds a year as a result.

But there was some better news for the nation's poorest people, with state pensions, welfare payments, and tax credits all set to rise by 10.1 percent, and with the minimum legal wage set to go up from 9.5 pounds an hour to 10.42 pounds.

Some members of Parliament from Hunt's own Conservative Party criticized the budget, saying the party should be a party of tax cuts, not hikes.

Esther McVey, a former Cabinet minister, said tax rises were the "last thing" the party needed, while lawmaker Simon Clarke, who was in former prime minister Liz Truss's Cabinet, said he feared Hunt had "overcorrected" Kwarteng's mistakes.

Rachel Reeves, the opposition Labour Party's shadow chancellor, said Britain should be unveiling a "proper plan for growth" instead of announcing tax hikes.

"The chancellor has deployed a raft of stealth taxes, taking billions of pounds from working people," she told lawmakers. She said the combination of high inflation and tax hikes will cost the average person 600 pounds a year.