UK’S Hunt Hikes Taxes, Slashes Spending To Tackle “Cost-Of-Living Crisis”

One month after stepping into his new role as UK Chancellor for the Exchequer, Jeremy Hunt has raised taxes on the UK’s top earners and tightened spending in an effort he says was needed to repair the country’s public finances amid a predicted 1.4% contraction in 2023.

Hunt is also lowering the threshold for paying the top 45% rate from £150,000 ($176,000) to £125,140 ($150,000). Those who earn at least £150,000 per year will pay an additional £1,200 as well in order to help pensioners and low-income households, Bloomberg reports.

Jeremy Hunt lowers the top-tier 45% tax rate threshold to just over £125,000, a major U-turn from Kwasi Kwarteng’s plan to scrap the rate https://t.co/SwVLpP1Sc2 pic.twitter.com/dcswVwqEzU

— Bloomberg UK (@BloombergUK) November 17, 2022

There will also be a significant increase in the energy and windfall taxes.

Hunt has been tasked with stabilizing the country’s finances following ‘one of the most chaotic periods in British history,’ when his predecessor, Kwasi Kwarteng (and short-lived PM Liz Truss) pushed for unfunded tax cuts – resulting in a run on the pound.

Since taking office last month, he’s been warning the British public — and the Tory backbenchers who’d cheered on the tax cutting plan — that he would have to take “difficult decisions” to win back the confidence of investors. -Bloomberg

“Today we deliver a plan to tackle the cost-of-living crisis and rebuild our economy,” Hunt said in a Tuesday statement to the House of Commons. “We also protect the vulnerable because to be British is to be compassionate and this is a compassionate Conservative government.”

Ironically, Cable is lower on Hunt’s Austere budget…

Hunt’s plan should provide an annual cost saving of £55 billion in 2027-28 (around 2.5% of GDP), according to Goldman.

Here are five key takeaways from Bloomberg:

• The outlook is grim: the country is already in recession and households face the biggest hit to disposable incomes ever as the government seeks £55 billion of fiscal consolidation

• Tories will hate this, because the government is taxing the rich to help the poor. That’s the opposite of the Liz Truss plan they were cheering a couple of months ago

• The poorest will get some protection, with pensions and benefits to rise in line with inflation. The energy aid is also extended, albeit with a higher cap on prices

• Energy firms are in the firing line with a new windfall tax on low-carbon generators and an extension to the raid on oil and gas companies

• The pound and bonds were lower, but market reaction was generally muted when compared to the fallout from the Kwasi Kwarteng budget

What won’t change? Thresholds for paying into the national insurance system, and the inheritance tax – at least until 2028.

State pensions and benefits were raised by 10.1%, in line with inflation, while the minimum wage was boosted 9.7% to £10.42. Rent hikes for social housing have been capped at 7%.