MADRID, 17 Oct. (EUROPA PRESS) –
The new UK Finance Minister, Jeremy Hunt, appointed last Friday after the dismissal of Kwasi Kwarteng, announced on Monday the practically total dismantling of the plan for tax cuts and public spending announced by the British Government last September to reverse nearly all announced tax cuts and cut the scope of spending plans, including capping energy prices for consumers.
Given the foreseeable repercussion on the markets of the changes introduced in the ‘mini budget’ and in order not to feed speculation, according to the Prime Minister, Liz Truss, it has decided to advance the main lines of the amendments before the fiscal program in the medium term that it plans to communicate on October 31.
“A central responsibility of any government is to do what is necessary to preserve economic stability, which is vital for companies to make long-term investment decisions and families to keep their jobs, pay their mortgages and face the cost of life”, explained Hunt, for whom “no government can control the markets, but all governments can offer certainty about the sustainability of public accounts”.
In this way, in addition to the decision communicated last Friday by Truss herself to back down on the plan to reduce corporate tax to 19% from 25%, which will allow the collection of 18,000 million pounds per year (20,682 million euros), it has been decided this Monday to suspend “indefinitely” the reduction of one percentage point in income tax from 20% to 19%, scheduled for April 2023, raising another 14,000 million pounds (16,000 million euros) per year the expected collection.
“It is not appropriate to go into debt to finance the Government’s plan to reduce income tax to 19% in April 2023 at a time when the markets demand commitments from us with the sustainability of public finances, so the tax is will remain at 20% indefinitely until economic circumstances allow it to be cut,” Hunt announced.
Likewise, the British Minister of Finance has indicated that the Government “will reverse almost all the tax measures announced in the plan communicated at the end of September”, including the cut in the tax on dividends, in addition to not going ahead with the new plan of purchases without VAT, nor with the freezing of taxes on alcohol and with the reforms to the rules of work outside the payroll, although it will maintain the reductions in stamp duty and National Insurance.
“All the changes have been designed to provide confidence and stability,” said Hunt.
On the other hand, in reference to the greater measure of spending contemplated in the ‘mini budget’, the head of the United Kingdom Treasury has confirmed that the ceiling of the energy bill will be maintained until April 2023, instead of two years, while that formulas will be studied to alleviate the impact of the rise in fuel prices on homes and businesses.
“We cannot expose public finances to the volatility of gas prices from April 2023 (…) Governments cannot eliminate the volatility of the markets, but they can play their role and we will do so because instability affects to the prices of goods in stores, mortgages and pensions”, he defended.
In this sense, the new UK Finance Minister has anticipated that “there will be more difficult decisions” in terms of taxes and spending, while reiterating his confidence in the UK’s long-term prospects.
