Sunak on Wednesday postponed the announcement of a long-awaited plan to restore the country’s public finances to November 17, two and a half weeks later than previously planned.
The two-week delay is expected to reduce the size of the public finance black hole by up to £10–15 billion ($NZ 19.9–29.8 billion), The Telegraph reported, citing an analysis to be published by the Resolution Foundation think tank.
The report noted a rapid decline in interest paid on government bonds and a fall in the international gas price.
It said Whitehall departments have been told to find savings of 10% to 15% each.
Shortly after Sunak became Britain’s prime minister on Tuesday, he said tough decisions lay ahead as he aims to cut government spending.
Jeremy Hunt, who was appointed by former Prime Minister Liz Truss as the Treasury Secretary (Treasury Secretary) to calm markets shaken by her drive for growth, was reappointed by Sunak and repeated his warning on Tuesday that “it’s going fast.” to be”.
Last week, The Telegraph reported that Hunt is considering up to £20 billion in tax increases in a budget previously slated for October 31.
Sunak is pitted against an economy facing recession at a time when the Bank of England is raising interest rates to curb double-digit inflation. Low growth and rising borrowing costs have put pressure on already tight public finances.
The government is working on austerity and canceling tax cuts, just as the rising costs of mortgages, food, fuel and heating are pushing many household budgets to their limits.
credibility hit
Britain’s credibility in the financial markets was shaken last month when Truss announced its unfunded tax cuts, sparking a bond market so severe that the Band of England had to step in. Truss was forced into a U-turn and eventually resigned.
While he was finance minister during the Covid-19 pandemic, Sunak oversaw massive spending and loans to keep the economy going. He resigned in July in protest at the leadership of then Prime Minister Boris Johnson and what he saw as an unwillingness to make tough decisions to pay the pandemic bill.
His appointment as Conservative Party leader was widely applauded by investors who considered him and Hunt more willing than Truss to address the gap in Britain’s public finances.
Hunt said he wanted to restore confidence “that the UK is a money-making country and for that reason the medium-term budget plan is extremely important. The plan would collapse in the medium term,” he added.
The slowdown in the budget plan will complicate the work of the Bank of England next week, when it must release forecasts for the economy without knowing the details of the government’s budget plans, as well as make its final monetary policy decision.
The bank is expected to raise interest rates again on Nov. 3, likely from 2.25% to 3.0%, although investors raised their bet on a full percentage point hike to a chance of more than one after the budget plan announcement. on three. delay.
Merry Christmas for Brits
More than two-thirds of British adults plan to cut back on party spending this year amid a worsening cost of living crisis, according to a survey published Thursday.
Despite two Christmases under social restrictions related to Covid, three quarters of adults don’t plan a big celebration, Accenture’s survey found.
About 49% of those surveyed wanted to cut back on gifts, 46% on dining out and 35% on both general socializing and eating and drinking at home.
Of those planning to spend less this Christmas, 45% plan to buy food from budget-friendly supermarkets.
“The fact that shoppers plan to spend less on gifts this year is a testament to how bad the mood is ahead of this Christmas,” said Kelly Askew, Accenture’s head of retail strategy and consulting.
With inflation at 10%, consumer confidence in the UK remains close to the bleakest on record and households have limited their spending.
Another survey by supermarket group Asda on Wednesday showed British families were £141 worse off in September than last year.
Accenture’s data is more pessimistic than a survey published Monday by market researcher Kantar which found that half of Britons plan to spend less on Christmas this year.
Tesco, Britain’s largest retailer, said earlier this month that Britons still want to celebrate Christmas but would like to do it in a more affordable way.