Can Rishi Sunak save Britain’s financial reputation?
Britain is facing an unprecedented economic crisis, and that’s why Robert Peston the political expert of ITV described England’s current economic situation as a “British economic horror movie”, especially after the decision of Bank of England, to raise the interest rate by 0.75% to 3%, the highest rate in two decades.
From the moment Rishi Sunak ran for the election of British Conservative leadership, he recognised the collapsing economy of his country as a result of the mistakes of his predecessor, Liz Terrace, and he knows now that his task will not be easy.
The financial and business markets are awaiting Sunak’s economic statement, which he postponed for weeks, as he was supposed to reveal details on October 31 before announcing the postponement of the e economic statement until November 17.
The status of the British economy
The Bank of England announced that the country will go through the longest recession in history, which could run into mid-2024, confirming that economic indicators are deteriorating further, in the worst crisis facing the British economy in 30 years, which prompted Bank of England to raise interest by 0.75%.
The main reason behind the British Central Bank’s procedures is that inflation has risen to 10%, and the Bank confirmed in its statement that it will continue to raise interest, which could reach 5.25%, as an attempt to reduce inflation, and return it to 6%, the highest interest rate recorded in 40 years.
Poverty in Britain has also risen to 22%, which is equivalent to 14.5 million people, according to Joseph Rowntree Foundation, which predicted that the number of poor will increase by about 450 thousand, and 250 thousand people will move into extreme poverty, had not the government considered new benefits scheme.
The Bank of England’s procedures will make it harder for borrowers, as 4 million people face the largest increase in their monthly premiums in 40 years.
The budget also faces a deficit or what economists describe as a “tax hole” of up to £50 billion, resulting from tax cuts granted by the government during the coronavirus pandemic.
How would Rishi Sunak face all these crises?
Since he was a chancellor Sunak was always clear about his economic approach, based on control of government spending and a gradual increase in tax incomes, it is therefore expected that Chancellor Jeremy Hunt will announce a plan to restore investors’ confidence in the UK economy, after it was shaken due to “Mini-budget” plan announced by former Prime Minister Liz Terrace, however the chancellor should restore the confidence of markets, without further suffering for households.
The new scheme would aim at saving money, in order to cover the budget deficit, by reduce public spending and raising taxes.
All government facilities should expect a reduction in their budget, except two sectors, defense and health, which Sunak promised would increase in their budget.
According to some media leaks, Jeremy Hunt’s scheme will be based on a 50% cut in government spending to save £25 billion this year.
Who is affected by Rishi Sunak’s plan?
Olvier de Schutter, the UN poverty rapporteur, warned Rishi Sunak of any economic measures that could affect the poor, however, the British government that it will provide tens of billions of benefit payments to help the households with their energy bills and living payment.
The government employees will face the worst impact of the economic crisis as Britain is facing strikes in the main sectors like health, education and transportation this month and the next, as the government continues to reject any pay rise, and British schools warn they face the worst funding crisis of 3 decades.
British economic experts will have to forget about “economic growth”, since reducing government spending means stopping growth, which a number of economists warned that it will lead to a vicious circle, since without growth the incomes will not rise, and it means that every year the government will have to reduce spending and raise taxes.
The most important question remains how much would be the scale of corporate tax increase, especially telecom companies, the financial sector and energy companies, which the opposition says have earned significant profits over the past years.
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