British Prime Minister Rishi Sunak has strongly denied claims that his economic policies will lead to a new era of austerity in Britain. During an exclusive interview with Bloomberg, he confirmed that the government is already spending a large amount of public funds.
Despite the Office for Budget Responsibility warning that his approach to cutting taxes implies a significant reduction in public service funding, Sunak maintains that these accusations are baseless. Sunak stresses his focus on public sector efficiency and his preference for tax cuts over increased government spending.
Sunak’s comments come ahead of the UK’s Global Investment Summit in London, where prominent business leaders such as Blackstone’s Stephen Schwarzman and JPMorgan Chase CEO Jamie Dimon are expected to attend. The summit is scheduled to unveil £29.5 billion (approx $3.1 lakh crore) in new investments. About 10 billion pounds sterling (approx $1.05 lakh crore) of this was previously announced.
The austerity debate is particularly sensitive for Sunak, as he aims to close a large poll gap with the opposition Labor Party. Labor currently leads by around 20 points, and a general election is expected in 2024.
The government is facing criticism after Chancellor of the Exchequer Jeremy Hunt announced £21 billion (approx $2.2 million) in tax concessions for companies and individuals. These tax cuts are partially offset by £19 billion (approx $1.9 lakh crore) decline in real government expenditure after the election, according to the Office for Budget Responsibility.
The Institute for Fiscal Studies has questioned the utility of these spending cuts, suggesting they may make the plan unsustainable. Areas such as the Department of Justice are facing significant funding cuts.
In an interview with Bloomberg, Sunak admitted his intention to reduce government spending to enable tax cuts. He plans to go beyond the 2% cut in National Insurance announced by Hunt. He describes this step as a journey towards more tax cuts.
Sunak’s pivot to tax cuts comes under intense pressure from his Conservative party and in the context of the high post-war tax burden, affected by the pandemic and the Ukrainian conflict. This shift is also in line with pre-election strategies as Conservatives confront voter concerns about the cost of living.
Sunak remains optimistic about the UK’s economic growth and investment prospects, despite the Office for Budget Responsibility recently downgrading growth forecasts.
Read the original Bloomberg article here.
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