Assure Britain of a “long-term fiscal sustainability”. After the disastrous resignation of his short-lived predecessor Liz Truss, who seriously damaged London’s economic credibility with an unsustainable budgetary program, British Prime Minister Rishi Sunak wanted to characterize, Thursday, November 17, the new financial orientations of his Conservative government, concocted with his finance minister Jeremy Hunt: reduce the debt, but not too quickly.
This will materialize as of next year by 22 billion pounds (25 billion euros) in tax increases and reductions in public spending, before a greater effort once the country emerges from recession.
Income tax hike
All households will pay more income tax due to the five-year freeze on all brackets – which will have strong consequences due to inflation. Jeremy Hunt, however, announced a 9.7% increase in the minimum wage, the amount to 10.42 per hour (€11.90), and 10.1% in social assistance and pensions, i.e. the rate of inflation in September.
Assuring want “to ask more of those who have more”the Chancellor of the Exchequer has reduced the level of the maximum bracket (to 45%) from 150,000 pounds (171,000 €) to 125,140 pounds (143,000 €), and sharply reduced tax allowances on capital gains. values.
Reduced resources for health and education
The tax on exceptional profits of oil and gas groups is increased (from 28% to 35%) and a 45% tax is created on the profits of electricity producers. Support for household energy bills will be extended after April, while being reduced for all households and increased for the poorest.
Jeremy Hunt also assured that the budgets of public services will increase from next April. But, with inflation estimated at more than 9% in 2022 and more than 7% in 2023, increases of 1% in the budget for the health system (NHS) and 2% for that of education actually lead to a significant reduction in their means. For the first time in their history, nurses will soon strike.
Return to traditional conservatism
This strategy marks a return to traditional conservatism, while showing the influence left by Boris Johnson’s strategy. When he came to power in July 2019, the tall, disheveled blond had deployed a rather Keynesian economic policy with major investments in national infrastructure and public services, even before the start of the Covid-19 pandemic.
Conversely, in September 2022, Liz Truss had been singled out for her ultraliberalism and her desire to transform the country into a “Singapore-on-Thames”via major tax cuts for the richest and for businesses.
Rishi Sunak and Jeremy Hunt thus take over the direction followed by David Cameron then Theresa May – the former finance minister George Osborne moreover participated in the design of the plan –, while deciding not to attack too quickly the public debt. No doubt the lessons of the 2010-2019 experience, which led to weak economic growth and impoverishment of the population. And also the fear that too harsh measures will undermine their chances of re-election in the 2024 elections.