Everyone able to pay taxes – Newspaper Kommersant No. 214 (7415) dated 11/18/2022

UK Treasury Secretary Jeremy Hunt on Thursday unveiled the country’s new fiscal plan, which includes an increase in the tax burden and spending cuts by a total of £55bn. to energy companies. The adjustment also affected the amount of subsidies for paying utility bills. Tighter fiscal discipline should ease pressure on the Bank of England to raise rates to fight inflation, which reached a record 11.1% in October.

Britain’s Chancellor of the Exchequer Jeremy Hunt on Thursday unveiled the country’s new fiscal plan, which provides for budgetary savings of £55 billion by cutting tax breaks and increasing the tax burden on energy companies, while the government will direct the country’s government to index benefits and offset part of the cost of utility bills £26 billion

The austerity should stabilize the budget and restore confidence in British debt after ex-Prime Minister Liz Truss failed to approve a plan to cut taxes (“growth plan”) in addition to measures to cap energy prices: his introduction caused a sharp increase in the required yield on government bonds country and the weakening of the pound sterling due to expectations of an uncontrolled increase in borrowing to cover the deficit, the situation required the intervention of the Bank of England, which announced a temporary redemption of government bonds.

Now, the country’s finance ministry has announced a freeze on income tax deductions until 2028, with the highest tax rate of 45% applied to income over £125,140 instead of the previous £150,000.

“Even in this case, we will retain the most generous system of benefits for this tax among the G7 countries,” Jeremy Hunt assured, speaking in parliament.

Liz Truss, by contrast, planned to abolish the top tax. The deduction threshold for dividend income will also change – it will be reduced from £2,000 to £1,000 next year and to £500 in 2024; £6k next year and up to £3k in April 2024. In addition, from January next year until March 2028, an increased tax on excess profits of energy companies will be in effect: for oil and gas companies, the rate will increase from 25% to 35%, for generating companies, an additional tax at a rate of 45% will be introduced. It is expected that this measure will bring the budget £14 billion.

The need to revise the budget arose against the backdrop of a sharp acceleration in inflation and increased spending on subsidizing the payment of utility bills. The current scheme (energy price guarantee) provides that households will pay no more than £2,500 for it this year and no more than £3,000 next year (previously, the first bar also applied to 2023), for an average household that would mean cutting gas and electricity bills by around £1,000 this year and £500 next year.

Tighter fiscal discipline is also needed to reduce inflationary pressure: consumer price growth peaked at 11.1% in October, the highest since 1981.

At the same time, the new cabinet expects GDP to contract by 1.4% next year, but will return to growth – by 1.3% – in 2024. RecallAccording to the results of the third quarter, the British economy has already contracted by 0.2%, while the central bank has already raised the rate to 3% and also expects that against the backdrop of tightening policies and high energy prices, the recession will last next year and in the first half of 2024. Reducing budget spending will reduce the burden on the regulator and will slow down the pace of rate hikes, ING Bank expects.

Tatyana Edovina