Tax increase+spending reduction combined boxing debut
Hunt said that a large-scale fiscal consolidation is needed in the future, including 30 billion pounds of spending cuts and 25 billion pounds of tax increases, in order to restore the credibility of the British government and control prices.
Specifically, the tax increase plan will target high-income earners and energy companies. The threshold of the highest personal income tax rate (45%) will be lowered from 6,543,805 pounds to nearly 6,543,800 pounds. At the same time, the windfall tax of oil companies will be raised from 1 next year to 25% to 35% in March 2028. In addition, power plants will face a temporary windfall tax of 45%. Hunter said that these measures will increase the tax revenue by 654.38+04 billion pounds next year.
In terms of government expenditure, for the energy expenditure ceiling plan, after the existing plan ends in April next year, the average household energy expenditure ceiling will rise from 2,500 to 3,000 in the next 12 months. Hunter stressed that energy subsidies for families will continue, but will not be "so generous". In terms of social welfare, the minimum hourly wage will be raised, and the British pension will also be raised by 10. 1% next year, which is linked to inflation. In order to reduce the impact of rising prices on the medical and social care system, the national medical service system will increase its budget by 5 billion pounds and its education budget by 3 billion pounds in the next two years.
Hunter announced that the real growth rate of public expenditure in the next parliament will be reduced to 1%, and capital expenditure will be frozen, raising 2,654.38 billion pounds and 654.38 billion pounds respectively. From April 2025, electric vehicle owners will no longer enjoy consumption tax exemption.
According to the calculation of the Office of Budget Responsibility (OBR), by 2027-2028, the tax burden of Britain will reach 37. 1% of GDP.
The tight fiscal policy has undoubtedly made the economic outlook even more bleak. Hunter pointed out that Britain has fallen into recession. OBR said that Britain's GDP growth rate was 4.2% this year, but it will be reduced by 1.4% next year, and then it will resume growth. In addition, inflation in Britain will reach 9. 1% and 7.4% this year and next, and the price pressure will "drop significantly" from the second half of next year. According to the latest data, the annual CPI rate in the UK in June was 5438+0 1. 1%, which was also the highest since June 198 1.
OBR predicts that by the end of 2024, the economy will return to the level before the epidemic. At the same time, rising prices will erode real wages and reduce people's living standards. In the fiscal year 2023-24, the real purchasing power will drop by 7%, which is the biggest drop in 60 years, completely offsetting the growth in the previous eight years.
The British Chancellor of the Exchequer insisted that tax increases and spending cuts were the requirements of an "international crisis" and played down the view that any problems originated from the mainland itself. He said that the autumn statement will ensure that the ratio of British debt to GDP will fall at the end of the five-year forecast provided by OBR. Hunter also pointed out that Britain is not immune from the global headwinds. His main goal is to help the Bank of England fight inflation. "We need fiscal policy and monetary policy to work together."
The British economy is facing a test under the New Deal.
Today, Britain's economic recovery is at a backward level among developed economies. According to the data compiled by OECD, in the third quarter of this year, Britain's GDP level was still 0.4% lower than that in the last quarter of 20 19 (before the outbreak of COVID-19). In contrast, the euro zone increased by 2. 1% and the United States increased by 4.2%.
AndrewBailey, governor of the Bank of England, said on Wednesday that the impact of Britain's withdrawal from the EU on Britain's economic weakness is still going on, and Britain needs time to repair its economic capacity and reputation.
Moody's, a rating agency, pointed out that the latest budget plan has restored the country's economic credibility to a certain extent, but due to the grim prospects, risks still exist. EvanWohlmann, Vice President of Moody's, said: "The British Chancellor of the Exchequer's ambitious fiscal consolidation plan is another step towards prudent fiscal commitment. However, the unpredictable intensification of polarized domestic political environment and policies may undermine the efforts of fiscal integration, especially considering the strong social and political pressure on government expenditure. "
JulianHoward, chief investment officer of GAMInvestments multi-asset solutions, said in a report that Hunter's principle seems to be that the financial gap of 40 billion pounds must be eliminated. The autumn statement will be another return since the 20 10 austerity plan. "This will mean a serious decline in public service expenditure and an increase in taxes levied on consumers and enterprises, which may lead to higher inflation and recession caused by interest rates." He added.
BillCampbell, portfolio manager of DoubleLine, believes that the rebound of the pound in the past month means that the budget plan may have been digested. The challenges facing Britain are the coming economic recession and the persistent energy crisis. "The market has basically told the British government that it will not accept any excessively radical fiscal stimulus measures."
SimonHarvey, head of European foreign exchange analysis at MONEX in London, predicts that the autumn budget plan will lower the interest rate endpoint of the Bank of England. "The austerity policy will be welcomed by [the Bank of England] because the support for British consumers will be reduced. But they still have a way to go to cope with the inflation prospect. We hope that the final interest rate will be around 4%. "
Money market interest rate futures show that the market expects the Bank of England's interest rate peak to reach 4.54% in August next year, which is 5 basis points lower than that before Hunter issued the autumn statement.