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UK faces £50 billion financial hole according to government sources

 


LONDON, November 7 (Reuters) – British Treasury Secretary Jeremy Hunt says he will try to fill a £50 billion ($57 billion) hole in the country’s public finances with around £30 billion in spending cuts and $20 billion in tax increases Two government sources said: On Monday.

Hunt is due to file a financial report with Congress on November 17th. He will aim to restore confidence in financial markets after predecessor Kwasi Kwarteng’s September 23 tax cut plans caused the sterling to fall to an all-time low against the US dollar and ultimately force Liz Truss. He resigns as prime minister.

Britain’s Guardian newspaper reported on Sunday that an early draft of Hunt’s statement included spending cuts of up to £35 billion and a tax increase of £25 billion, while the Financial Times released figures of £33 billion and £21 billion respectively on Monday.

Two government sources questioned about these estimates told Reuters they are within the correct range, but the final figures are subject to change.

The UK Treasury declined to comment on both estimates.

Treasury sources last week said widespread tax hikes are likely to fill a “fiscal black hole.”

The UK’s last set of budget forecasts, released in March, showed the government at the time had £28 billion left to cut debt in the economy.

Excluding the £16 billion payroll tax that came into effect on 6 November, most of the £45 billion unpaid tax cuts announced by Quarten were quickly canceled.

While short-term government borrowing costs have largely returned to levels before Kwarteng’s statement, long-term borrowing costs have risen somewhat and the economic outlook is bleak.

Last Thursday, the Bank of England (BoE) predicted that the UK is at risk of its longest recession in 100 years, but much less severe than during the pandemic or after the 2008-09 financial crisis.

These forecasts assumed higher interest rates than what the BoE said were possible, but did not take into account the November 17th fiscal tightening.

Last month, the UK’s Resolution Foundation called for Hunt to announce a £40 billion fiscal tightening to reduce public debt from gross domestic product (GDP) in the medium term and provide a £12 billion buffer against unexpected shocks. estimated to do

($1 = 0.8728 pounds)

Reports by Elizabeth Piper and David Milliken, edited by Kylie MacLellan and Catherine Evans

Our Standard: The Thomson Reuters Trust Principle.

Sources

1/ https://Google.com/

2/ https://www.reuters.com/world/uk/uk-faces-50-billion-pound-fiscal-hole-government-sources-say-2022-11-07/

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