UK: is the new budget a way out of the crisis?
Inflation at over eleven percent, a rising national debt, a long recession ahead and a credit rating that took a beating in the brief Truss era: against this backdrop the British Chancellor of the Exchequer Jeremy Hunt has unveiled a new budget plan. Tax hikes to the tune of 24 billion pounds and cutbacks of 30 billion aim to provide stability.
Targeted help for the needy
Hunt has pulled the right levers, finds Philip Plickert, London correspondent of the Frankfurter Allgemeine Zeitung:
“In view of the very real plight of millions of households that are asking themselves how they are going to pay their energy and other bills, it is right and commendable that Hunt is propagating a 'compassionate' conservatism that does not forget the socially vulnerable. The previous government's extremely expensive energy subsidy according to the watering-can principle will be cut, and instead there will be more targeted help for the needy. Pensions and social benefits will be increased in line with the inflation rate. ... Hunt puts a heavier burden on top earners than on low earners. This means that his budget will offer less room for attacks by the Labour opposition.”
Debts passed on to the next government
Painful but necessary measures are being delayed, criticises The Economist:
“Delaying the pain minimises the blame the Tories will receive before the next election. If they lose it, it will put the burden of raising taxes or cutting spending on Labour. But the delay is bad for Britain. It means that debts will continue to mount and that, to control inflation, the Bank of England will need to raise interest rates higher than it otherwise would. ... 'As Conservatives we do not leave our debts to the next generation,' Mr Hunt declared. His party is, however, leaving the country's debts to the next government. That amounts to pretty much the same thing.”
No growth strategy
For the Financial Times the budget plan does not have much to offer:
“Where the statement was badly lacking was in plans to boost potential growth. Plans to freeze capital spending after 2025 - meaning a big cut from what was previously planned - will take a serious toll. Little was announced to boost feeble business investment, which remains a significant drain on productivity. The government acknowledged the urgency of getting inactive workers back into a labour force still smaller than it was pre-pandemic, but fell short of devising policies.”