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Taxes: Great Britain seals 180-degree turnaround in tax policy

2022-11-17T17:05:58.566Z


Taxes up instead of down: British Prime Minister Sunak reverses the plans of his predecessor Liz Truss. In addition to top earners, oil, gas and electricity producers should also pay more in the future.


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Jeremy Hunt presenting his budget plans

Photo: House of Commons / dpa

The new British government of Prime Minister Rishi Sunak is turning away from the previous tax cut plans and is focusing on budget restructuring.

Treasury Secretary Jeremy Hunt unveiled his consolidation plans, which were eagerly awaited by the financial markets, on Thursday.

This is intended to close a budget gap of around £55 billion (around €62.8 billion) over the next few years.

Almost half of this should come together on the tax side, the rest on spending discipline.

The tax burden for higher earners is increasing.

The threshold for paying the top rate of income tax will drop from £150,000 to £125,140 a year.

It's about asking more from those who have more, Hunt stressed.

The levy on oil and other energy companies will be increased from 25 percent to 35 percent and also extended by three years to 2028, the finance minister said.

In addition, there should be a new tax of 45 percent for electricity producers.

This should be introduced “temporarily”.

"It's a plan of balanced stability," Hunt told lawmakers.

“I have tried to be fair by asking those who have more to contribute more.” Britain's economy, like other countries, is in recession, Hunt said, citing figures from the Government's Budget Forecasting Agency ( OBR).

Gross domestic product (GDP) will fall by 1.4 percent in the coming year.

The central bank fears that the recession could drag on for years.

"Today we are unveiling a plan to tackle the cost of living crisis and rebuild our economy," the finance minister said.

Public spending would grow at a slower pace than the economy, but total spending on public services will increase in price-adjusted terms over the next five years.

Hunt had announced "tough but necessary" decisions that should also help curb inflation on the island, which has recently risen to 11.1 percent.

The austerity course is a drastic course change after the short reign of Sunak's predecessor Liz Truss, who had triggered turbulence on the bond markets with financially unsecured tax cut plans.

These only subsided after intervention by the central bank.

Energy price cap extended

Great Britain is sitting on a mountain of debt of 2.45 trillion pounds (around 2.8 trillion euros).

With his restructuring course, Hunt wants to ensure that investors' lost confidence returns and that the state's financing costs are kept in check.

Trust cannot be taken for granted, said Hunt: "We conservatives do not leave the debt to the next generation."

At the same time, the government is required to continue to provide relief to citizens in times of sharply rising energy costs.

According to the ONS statistics office, inflation would have climbed to 13.8 percent in October if the government had not capped household energy bills.

This government-imposed cap on household energy bills, set at an average of £2,500 a year, expires in April.

Hunt has now announced that it will then extend the cap by twelve months and at the same time increase it by £500.

He also wants to follow the proposal of the Low Wage Commission and raise the minimum wage by 9.7 percent to £10.42 (EUR 11.92) from April.

"Best regards" from Lindner

Criticism came immediately from the union side: Gary Smith, general secretary of the GMB union, expects that despite the price-adjusted increase, workers will have less in their wage packets: "The Conservatives have driven the economy to the wall and now the workers should foot the bill."

Federal Finance Minister Christian Lindner (FDP) spoke up on Thursday with an interjection from Berlin about Truss's sometimes chaotic government interlude: Prosperity must first be generated before it can be distributed: "It can't work the other way around in the long run - kind regards to London."

The state cannot spend more money than it has available.

Source: spiegel

All business articles on 2022-11-17

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