Britain’s Treasury chief said on Friday that taming inflation is more important than cutting taxes, resisting calls for immediate tax breaks for businesses and voters by some in the ruling Conservative Party.
In a speech in London, Chancellor of the Exchequer Jeremy Hunt said, “The best tax cut at the moment is a cut to inflation.”
Britain’s annual inflation rate hit a four-decade high of 11.1% in October, sparking a cost-of-living crisis and workers demanding pay rises to keep pace with rising food and energy prices. Strikes started. It has eased since then but still reached a painful 10.5% in December and is the highest since the 1980s.
Prime Minister Rishi Sunak has promised to halve the inflation rate from those levels by the end of the year.
Hunt said he wanted Britain to be a low-tax economy but “with volatile markets and high inflation, strong wealth must come first” – a signal that he would not cut taxes when he made his annual budget statement in March. will do.
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Britain’s economy, like others around the world, has been battered by pandemic sanctions and shocks from Russia’s invasion of Ukraine. Britain has also suffered from the self-immolation of Liz Truss’ brief tenure as prime minister last year. He resigned in October after plans for unaffordable billions of tax cuts rattled financial markets, raised borrowing costs and sent the pound to a record low against the dollar.
Hunt was appointed in the final days of the seven-week term of the truce to stabilize the economy and was retained by his successor, Sunak.
With inflation higher than in the US and 20 countries that use the euro currency, most forecasters expect the UK economy to contract in the first half of 2023.
In his speech at the headquarters of news agency Bloomberg, Hunt argued that changes to financial regulations and other regulations made possible by Brexit would help boost Britain’s low productivity rate.
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Three years after Britain formally left the European Union, and more than two years after the split was completed, the Conservative government is still struggling to deliver on the many economic benefits promised by pro-Brexit politicians.
Most economists agree that Brexit has weighed on the economy by making it harder for UK-based businesses to do business with the 27-nation European Union.
Hunt said the change “needed, activated and made possible by Brexit” would help “make Britain the world’s next Silicon Valley”, a leader in digital technology, green energy and life sciences.
“We need to make Brexit a catalyst for bold choices that will take advantage of the agility and flexibility that it makes possible,” he said, arguing that “Britain needs a more positive approach to risk-taking”. and “very cautious in comparison” to our American friends.
Hunt said Britain would scrap Solvency II, an EU rule that sets how much money insurers must hold in reserve. Hunt said easing the ban could unlock 100 billion pounds ($124 billion) of investment over a decade for large infrastructure and clean energy projects.
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Business groups welcomed the tone of Hunt’s speech but said it lacked specifics. Tony Danker, head of the Confederation of British Industry, said it provided “a strong framework for growth”, although Shevuun Haviland of the British Chambers of Commerce said Hunt’s vision had “very little meat on the bones”.
Rachel Reeves, economy spokeswoman for the opposition Labor Party, said the Conservatives, in power since 2010, “have no plan for now, and no plan for the future.”
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