Sunak eyes as much as £50b of British spending cuts, tax rises
Britain’s Prime Minister Rishi Sunak is seeking to build a buffer in the public finances as he draws up an economic plan to plug the country’s budget shortfall, which could entail tax rises and spending cuts totalling as much as £50 billion.
Sunak and Chancellor of the Exchequer Jeremy Hunt want the extra headroom over and above Britain’s £35 billion fiscal hole so that the package has credibility with the markets, an official familiar with the matter said.
Another source said that could entail spending cuts and tax rises closer to £50 billion, a figure widely reported in the British media on Friday.
Britain’s new premier is trying to restore calm to the financial markets after his predecessor, Liz Truss, sparked turmoil during her 7-week tenure.
She introduced a massive package of unfunded tax cuts that tanked the pound to an all-time low against the dollar and sank the gilts market.
Sunak and Hunt on Wednesday delayed a planned economic statement to Nov 17 from Oct 31 to give them more time to make what the premier described as the “right decisions” to manage the British economy.
The two men held a “sober” meeting on Thursday to run through their options, one of the officials said.
They were shown recent data that demonstrated the markets had stabilized in recent days but that Britain still faces serious challenges.
That’s because growth is still depressed by high gas prices and stubborn supply chain issues as a result of the Covid-19 pandemic and Russia’s invasion of Ukraine.
Moreover, they were told that growth is likely to be considerably lower than the most recent official forecasts from the Office for Budget Responsibility.
That will have the knock-on effect of lowering projections for tax revenue, increasing the size of the budget hole to fill.
Sunak and Hunt are trying to chart a path to sustainable public finances that’s likely to rein in some of the excesses of the previous two premiers.
As well as reversing much of Truss’s tax cuts, some of her predecessor, Boris Johnson’s infrastructure spending pledges are also likely to be under the microscope.
People familiar with the matter said earlier this week that the Treasury has drawn up a list of 104 options to cut spending.