Britain Unveils New Economic Roadmap
As a cloud of economic gloom descends over Britain, the British government announced a £55 billion ($65 billion) plan of tax increases and spending cuts on Thursday in a bid to stabilize the budget and calm uneasy markets.
Prime Minister Rishi Sunak’s five-year-plan will likely intensify economic pressures on a public already struggling to cope with a painful cost-of-living crisis. Inflation soared to a 41-year high of 11.1 percent last month, and the country will soon face its largest-ever decline in living standards, according to the Office for Budget Responsibility, meaning Britons will see their real disposable incomes decline by over 4 percent.
Britain has already slid into a recession, Chancellor of the Exchequer Jeremy Hunt said on Thursday. In his address, he acknowledged that the government was making “difficult decisions,” although he stressed that the moves were necessary.
“There is a global energy crisis, a global inflation crisis and a global economic crisis,” he said. “But the British people are tough, inventive and resourceful. We have risen to bigger challenges before.”
“We aren’t immune to these headwinds but with this plan for stability, growth and public services, we will face into the storm,” he added.
Sunak’s economic agenda marks a sharp reversal from that of his embattled predecessor, Liz Truss, who resigned in October after facing sharp political blowback over pushing for unfunded tax cuts for wealthy Britons.
Soon after Truss’s plan was announced, the value of the pound plummeted to a record low against the dollar and the Bank of England declared an emergency intervention into markets. As political pressure against her economic agenda intensified, Truss dismissed Kwasi Kwarteng, then the chancellor, and walked back parts of her controversial policies before eventually resigning herself.
Sunak has now been in office for nearly a month, having just attended the latest U.N. climate talks, COP27, as well as the G-20 summit in Bali, Indonesia. As the Financial Times‘ Martin Wolf argues, “The most important achievement of Hunt and Rishi Sunak is to reintroduce a degree of coherence and predictability into policymaking.”