According to two government sources, British Finance Minister Jeremy Hunt will aim to close a $57 billion deficit in the nation’s public budget with roughly $30 billion in spending cutbacks and $20 billion in tax increases.
On November 17, Hunt is scheduled to give a financial statement to the legislature. After his predecessor Kwasi Kwarteng’s tax-cutting plan on September 23 drove the value of the pound to a record low versus the dollar and ultimately led Liz Truss to resign as prime minister, he will work to restore market confidence.
The most recent set of budget projections for Britain was released in March, and they indicated 28 billion pounds of headroom to reach a government goal to lower debt as a share of the economy.
With the exception of a 16 billion pound reduction in payroll taxes that went into effect on November 6, the majority of the 45 billion pounds in unfunded tax cuts that Kwarteng announced were swiftly reversed.
Although longer-term borrowing costs are slightly higher and the economic outlook is gloomy, short-term government borrowing costs are largely back where they were before to Kwarteng’s comments.
The Bank of England warned on Thursday that Britain risked entering its deepest recession in a century, albeit one that would be significantly less severe than those seen during the pandemic or during the 2008–2009 financial crisis.
These projections included higher-than-expected interest rates but did not account for any fiscal tightening on November 17.
To ensure that public debt decreased as a share of GDP over the long term and to provide a 12 billion pound buffer against unforeseen shocks, according to an estimate made by Britain’s Resolution Foundation last month, Hunt would need to declare 40 billion pounds of fiscal austerity.
