If there is one day that matters for Rishi Sunak this week, it is Thursday. On November 17, the British Prime Minister will sit on the green bench in the House of Commons and listen to his Chancellor of the Exchequer, Jeremy Hunt, announce one thing above all else: bad news. Prior to his budget speech, Hunt did some expectation management. at Sky News For example, it sounded like this: “We’re all going to have to pay more taxes, I’m afraid.”
Really all? Well, Sunak and Hunt have identified a budget deficit of a good £50 billion, which is the equivalent of around 57 billion euros. The two want to plug this hole – with spending cuts and tax increases. But there should also be good news, insofar as that is even possible with an inflation rate of ten percent. According to the conservative newspaper Times In any case, the minimum wage should rise from £9.50 to £10.40 per hour worked. That would be an increase of almost ten percent, roughly the value of the inflation rate.
In Westminster it is said that wage increases for low earners should not stop there. Pensions and social benefits are also to be adjusted in line with inflation. The government’s goal is to help the poorest in the country in particular to get through the winter. In addition, there is a price cap for gas, which has benefited all households since October. If Sunak and Hunt have their way, this cap should last until April. After that, the prices are likely to be adjusted – and upwards.
Sunak says he wants to meet “the expectations of the international markets”.
So the question remains where the money will come from. According to reports, Sunak and Hunt primarily want to ask those who earn very well to pay. So far, the UK’s top tax rate of 45 percent starts with an annual income of £150,000 (about €170,000). That threshold is set to drop to £125,000 (about €142,000), which would bring the state significantly more revenue.
According to British media, Sunak and Hunt are planning £22 billion in tax hikes, which should also include an increase in the excess profit tax for energy companies. The volume of spending cuts is reported to be £33 billion. The government will probably not only cancel planned infrastructure projects such as the construction of new routes for high-speed trains, but will also save on defense spending. In any case, Sunak has so far avoided as far as possible to confirm a corresponding plan by his predecessor Liz Truss.
The former prime minister wanted to increase defense spending to three percent of economic output – and thus exceed NATO’s two percent target. Sunak is no longer talking about that. He seems satisfied that Great Britain – unlike Germany – is one of those NATO countries that have reached the previous two percent target.
It looks like the prime minister has other concerns. Sunak’s aim is to “meet the expectations of the international markets” with the budget plans, as he said this week. And that expectation is just over £50 billion that London is supposed to save. In government circles, it is therefore assumed that the sum that tax increases and spending cuts should bring should by no means be less.
In any case, Sunak wants to avoid that the financial markets become unsettled again. When his predecessor Truss announced unfunded tax cuts, hedge funds in particular caused UK government bond yields to rise so much that the Bank of England had to intervene. The pound sterling also came under massive pressure. Sunak wants to prevent such a scenario. And so on Thursday one message in particular should come from London: Solid economic activity is once again taking place here.