LONDON: The UK government on Sunday warned of impending tax hikes, especially for the wealthy, as it bids to repair economic havoc wrought by Liz Truss’s short-lived tenure as prime minister.
Truss’s successor Rishi Sunak, who was heading to a G20 economic summit in Indonesia, has vowed to get soaring inflation under control even if it means more pain for hard-pressed consumers and businesses.
His finance minister, Jeremy Hunt, told Sky News that the pain would fall disproportionately on the better off when he unveils an emergency budget statement on Thursday.
“We’re all going to be paying a bit more tax, I’m afraid,” he said, while refusing to be drawn into detail on the plan, after a tax-cutting budget by Truss caused panic on financial markets.
Hunt conceded that the UK economy was already likely in recession after a contraction in the July-September quarter, “but we are a resilient country and we’ve faced much bigger challenges, frankly, in our history”.
“We will be asking everyone for sacrifices,” the chancellor of the exchequer stressed.
“But I think in a fair society, as we are in the UK, we need to recognise that there’s only so much you can ask from people on the very lowest incomes, so that will be reflected in the decisions that I take.”
Hunt is reportedly looking at changing income tax brackets, to raise more revenue from high earners, and impose strict curbs on government spending for years to come even as inflation hits double digits.
He is seeking up to £60 billion ($71 billion) in savings and extra revenue — half of which was left by a budget black hole bequeathed by Truss, according to the Resolution Foundation, a think tank.
“We do have to do some tax rises, do some spending cuts, if we’re going to show that we’re a country that pays our way,” Hunt said, insisting his policies would make any recession “shallower and quicker”.
Hunt said the surge in energy prices linked to the war in Ukraine amounted to an economic hit of £140 billion.
“It’s like the economy supporting an entire second NHS (National Health Service),” the chancellor said.
Asked if the NHS was on the brink of collapse after the Covid pandemic, Hunt acknowledged “massive pressures” in the service and “unbearable pressure” for doctors and nurses.
But he rejected a 17-percent pay claim lodged by Britain’s main nursing union, which laast week voted to go on strike for the first time in its 106-year history.
“We have to recognise a difficult truth that if we gave everyone inflation-proof pay rises, inflation would stay,” he said.
Ahead of Hunt’s budget, the opposition Labour party accused the government of leaving public services such as the NHS “on their knees” after 12 years of Conservative rule.
Labour’s finance spokeswoman Rachel Reeves told Sky that “austerity 2.0” was not the right way forward in this week’s budget, calling it a “badge of shame” that the nurses felt compelled to go on strike.
Tens of thousands of staff in various industries — from the postal and legal systems to ports and telecommunications — have already gone on strike across Britain since the summer to press for higher pay.
Hunt was also challenged about growing evidence that Britain’s exit from the European Union is causing long-term harm, with comparable economies recovering much faster from the pandemic.
“I don’t deny there are costs to a decision like Brexit, but there are also opportunities, and you have to see it in the round,” said Hunt, who voted in 2016 to stay in the EU.