The UK "it is now in a recession“. The new chancellor of the exchequer stated it clearly, Jeremy Hunt citing the new estimates by the OBR, the body that provides independent analyzes of the country's public finances.
The new estimates on the British economy
According to the OBR, in 2022 the United Kingdom will grow by 4,2%, a percentage higher than the 3,8% previously estimated. Problems will come in 2023, when GDP will record a contraction of 1,4% to then rise by 1,3% in 2024. At the end of the year, the inflation – which reached 11,1% yesterday – should settle at 9,1%, before falling to 7,4% in 2023.
The incidence of the public debt to GDP of the UK will reach 97,6% on the 2025-2026 fiscal year, far higher than the previous forecast of 80,9%, which dates back to March, and will remain almost unchanged at 97,3% on 2027.
These estimates, explained Hunt explaining the budget law in Parliament, "confirm that our actions today will contribute to a sharp drop in inflation starting from the middle of next year".
United Kingdom: maneuver from 55 billion in spending cuts and tax increases
Presenting in Parliament the expected autumn economic maneuver of the new government led by Rishi Sunak, Hunt announced a maxi plan of spending cuts and tax increases to cover the enormous £55bn hole in public accounts and recover the confidence of the markets lost due to the financial storm that exploded following the unfortunate tax plan of former premier Liz Truss.
In detail, the maneuver is divided into 2 sections: 45% (£25bn) relates to tax increases and 55% (30 billion) spending cuts spread over the next few years.
According to forecasts, the tax burden will rise from 36,4% of GDP in 2022 to 37,5% in 2024, reaching highest level since the war.
Taxes: here are all the increases
The Sunak Government plan provides that, as established by the former Johnson executive, in 2023 le corporate taxes they will rise from 19% to 25%, a measure that should bring about 18 billion pounds into the Treasury's coffers. And again: the extra profit tax of energy companies will increase from 25% to 35% in the first quarter of 2023, while for electricity producing companies a new 45% tax will come.
The main measures of the plan include the freeze of the taxable thresholds for income taxes, inheritance taxes and social security contributions until 2028 and the reduction of the threshold for the application of themaximum rate of 45% from £150.000 to £125.140. A measure, the latter, diametrically opposed to the one announced a month and a half ago by former premier Liz Truss who had reduced the maximum rate on the richest from 45 to 40%.
Planned reduction from 2000 to 1000 pounds (500 in 2024) of the money that shareholders can earn in dividends without paying taxes. Finally, electric cars (now exempt) will start paying car taxes from 2025. Finally, Hunt promised increases in line with the inflation rate (+10,1%) of state subsidies and social pensions.
"Although my decisions today result in substantial tax increases, we have not raised major tax rates, and taxes as a percentage of GDP will only rise 1 percent over the next five years," Hunt said.
