Jeremy Hunt, the British finance minister, announced a series of tax increases and tighter spending in a difficult budget plan that he called necessary to restore the country’s public finances. He also said that the economy would shrink by 1.4% in 2023.
Here are some key phrases:
“Today, we present a plan to address the cost-of-living crisis and rebuild our economy. Stability, growth, and public services are our priorities. We protect the vulnerable because being British means being compassionate, and this compassionate Conservative government is.
BANK OF ENGLAND
“The Bank of England has done an exceptional job since independence and I now support it in its mission of defeating inflation. Today, I confirm that we will not change our remit.
“But fiscal and monetary policies must work together. That means that the Bank and the government need to work in unison. This includes ensuring the world has confidence in our ability and capability to repay our debts.
The OBR predicted that the UK’s annual inflation rate would be 9.1% and 7.4% next year. They also confirmed that today’s actions help to reduce inflation sharply by the middle of next year. They also concluded that the UK is currently in recession, just like other countries.
ON GROWTH/UNEMPLOYMENT/DEBT FORECASTS
The economy is expected to grow by 4.2% overall in 2019. The GDP will then fall by 1.4% in 2023, before increasing by 1.3%, 2.6% and 2.7% over the next three years. According to the OBR, the major reason for the decline in cumulative growth from March is due to higher energy prices. They expect an increase in unemployment, from 3.6% today to 4.9% by 2024, before falling to 4.1%.
They also anticipate a rise in unemployment from 3.6% to 4.9% today in 2024, before falling to 4.1% in 2014.
“Today’s decisions mean that over the next five years, borrowing is more than halved. This year, we are forecast to borrow 7.1% of GDP or 177 billion pounds; next year, 5.5% of GDP or 140 billion pounds; then by 2027-28, it falls to 2.4% of GDP or 69 billion pounds.
“Infrastructural debt as a percentage GDP begins to decline from its peak of 97.6% in 2025-26 to that of 97.3% 2027-28.”
ON NEW FISCAL RULES
“I also confirm two new fiscal rules. The first is that the underlying debt must be reduced as a percentage of GDP by the fifth year of a five-year rolling period. The second is that public sector borrowing must not exceed 3% of GDP over the same period. Both rules are met by the plan I am announcing today.
ON TAX RISES
“Asking for more from people who have more is the first difficult tax decision I make. The threshold at which the 45p rate becomes payable, from 150,000 to 125.140 pounds, is reduced. Only 1,200 more pounds per year will be paid to those who earn 150,000 pounds or greater.
“I will maintain the current income tax personal allowance, higher-rate threshold and inheritance tax thresholds at their current levels for two more years, taking us to April 2028.”
“The dividend allowance will decrease from 2,000 to 1,000 pounds next year to 500 pounds starting in April 2024. The annual exempt amount for capital gains tax will decrease from 12,300 to 6,000 pounds next year and then drop to 3,000 from April 2024.”
“From January 1st to March 2028, we will increase our Energy Profits Levy by 25% to 35%.
“The structure and profits of low-carbon electricity generation also make it profitable. Therefore, we have decided to introduce a temporary 45% levy for electricity generators starting January 1. These taxes together will raise 14 billion pounds next fiscal year.
DEFENCE SPENDING/ FOREIGN AID BUDGET
To be in line with our NATO commitment, we will keep the defense budget at least 2 percent of GDP.
“The OBR’s forecasts indicate a significant shock for public finances, so it won’t be possible to return the 0.7% target before the fiscal situation permits. We are fully committed to the target, and the plans that I have laid out today assume ODA spending will be around 0.5% during the forecast period.
ON ENERGY PLANS
“By 2030 we aim to reduce the energy consumption of buildings and industry by 15%. This reduction in demand would result in a savings of 28 billion pounds on our national energy bills or 450 pounds on the average household’s monthly bill.
“In this Parliament, we already plan to invest in energy efficiency a total amount of 6.6 billion pounds. Today I am announcing additional funding of 6 billion pounds starting in 2025. This will double our annual investment to achieve this national goal.
“We will extend the Energy Price Guarantee to 12 more months starting in April at a higher level, 3,000 pounds per annum for the average household.” This will provide an average support of 500 pounds for each household, despite the fact that prices are expected to rise through next year.
“I am pleased to announce that we will be investing an additional 2.3 billion pounds in our schools next year and every year thereafter.”
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