Hunt attempts to mend Britain’s tarnished economic reputation in Autumn Statement

Jeremy Hunt, Chancellor, on Thursday will seek to restore Britain’s ailing economic reputation with a massive package of tax hikes and spending cuts to repair public finances and tame inflation.

Hunt’s autumn statement will deepen the financial hardship of millions of Britons and usher in years of public sector austerity, but the Chancellor will claim the pain is necessary to stem rising prices and restore confidence in Britain.

While Hunt will insist that taming inflation is the ultimate “growth strategy”, the Chancellor will also announce crucial City of London reform that should allow insurance companies to free up billions of pounds of capital to invest in green energy and other infrastructure projects invest.

The reform of the EU’s Solvency II rules comes at the end of months of tense negotiations between the Treasury and the Bank of England, which feared looser capital rules could make the sector less safe. A number of sources told the Financial Times that a compromise had been reached.

The autumn statement will focus on Hunt’s attempt to bring inflation under control and repair public finances battered by the Covid-19 crisis, the Ukraine war, years of sluggish growth and rising debt interest costs. He will announce a fiscal consolidation that could top £55bn.

BoE Governor Andrew Bailey told MPs the world will be watching to see if Hunt can undo the additional damage caused by Kwasi Kwarteng’s catastrophic “mini” budget on September 23 that sent gilt markets into a tailspin .

“We’ve damaged our reputation internationally,” he said the Commons Treasury Committee. “It’s going to take longer to fix that reputation than it will fix the Gilt markets.”

Although gilt yields have stabilized since Hunt replaced Kwarteng at the Treasury – scrapping most of the “mini” budget measures in the process – global markets are still anxiously watching what happens next.

Prime Minister Rishi Sunak told the G20 summit in Indonesia that Britain’s reputation was “stricken” and that it was vital that the government restore “stability and confidence in the UK’s economy”.

Hunt’s plan is expected to provide a path for debt as a percentage of GDP to start falling by the end of the Office of Fiscal Responsibility’s five-year forecast period in 2027-28. The opposition Labor Party claims the country is on the verge of “austerity 2.0”.

Hunt’s package includes tax hikes across the board, but those with the “broadest shoulders” will pay the most. Millions more people will pay the top tax rate of 45p and levies on capital gains and dividends will rise.

A freeze on personal income tax allowances and thresholds will result in steep “secret” tax hikes after the expected general election in 2024, while Hunt will mandate sharp cuts in public spending in the next parliament.

He is expected to raise pensions, benefits and the minimum wage in line with inflation next April, based on September’s figure of 10.1 percent. On Wednesday, the October inflation rate hit 11.1 percent, a 41-year high.

Treasury Department officials declined to comment on suggestions by people close to the process that while public spending will be cut overall, social care spending could increase, which would help free up beds in overcrowded hospitals. Hunt will also have a great promotion program energy efficiency of houses.

The Chancellor will give the most vulnerable people extra help with their energy bills from April next year, capping average bills for all households at around £3,000 compared to a predicted ceiling of £4,000.

But Michael Lewis, CEO of Eon UK, warned: “A ‘squished middle’ of households and businesses without support faces serious energy debt from April 2023 – our analysis suggests that almost two-thirds of people are in debt on their energy bills are. ”

Although most of the autumn statement will focus on inflation and the financial crisis, Hunt will announce that the Treasury has finally reached an agreement with the BoE’s Prudential Regulation Authority to revise Solvency II rules.

The Chancellor will claim that the changes will take advantage of the regulatory freedom that Brexit offers and will help the city spur growth, although the EU has already started reforming the insurance rules themselves.

Treasury insiders and some senior city figures say the deal with the BoE on Solvency II is part of a “broader discussion” that could see the Treasury drop its plan to give ministers “the power to intervene” to override city regulators.

The Treasury Department declined to comment, but Bailey stepped up his attack on the idea on Wednesday: “I’m concerned about this — yes, I am,” he said.

He called for the current regulatory system to continue, in which Parliament legislates, the Chancellor gives the regulators a mandate, and then they proceed to implement that regulation. Call performance, Bailey said, “muddles the water.” Hunt attempts to mend Britain’s tarnished economic reputation in Autumn Statement

Adam Bradshaw

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