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UK Prime Minister Rishi Sunak has strongly refuted claims that his economic policies will lead to a new era of austerity in Britain. During an exclusive interview with Bloomberg, he asserts that the government is already spending a substantial amount of public funds.
Despite the Office of Budget Responsibility’s warning that his tax-cutting approach implies a major reduction in public service funding, Sunak maintains these accusations are baseless. Sunak emphasises his focus on public sector efficiency and his preference for tax reductions over increased government expenditure.
Sunak’s comments come ahead of the UK’s Global Investment Summit in London, where prominent business leaders like Blackstone’s Stephen Schwarzman and JP Morgan Chase CEO Jamie Dimon are expected. The summit is set to reveal £29.5 billion (around ₹3.1 lakh crore) in new investments. Around £10 billion (around ₹1.05 lakh crore) of this had been previously announced.
The debate over austerity is particularly sensitive for Sunak as he aims to bridge a significant polling gap with the opposition Labour Party. Labour currently leads by about 20 points, and a general election is anticipated in 2024.
The government has been contending with criticism following Chancellor of the Exchequer Jeremy Hunt’s announcement of £21 billion (around ₹2.2 lakh crore) in tax concessions for businesses and individuals. These tax cuts are partially offset by a £19 billion (around ₹1.9 lakh crore) decrease in real government spending post-election, as per the Office of Budget Responsibility.
The Institute for Fiscal Studies has questioned the feasibility of these spending cuts, suggesting they could make the plan unsustainable. Areas like the Justice Department face significant reductions in funding.
Sunak, in the Bloomberg interview, admitted his intent to reduce government spending to enable tax cuts. He plans to exceed the 2% reduction in national insurance announced by Hunt. He labels this move as a journey towards further tax cuts.
Sunak’s pivot to tax reductions occurs under heavy pressure from his Conservative Party and the context of a post-war high tax burden, affected by the pandemic and the Ukraine conflict. This shift also aligns with pre-election strategies as the Tories face voter concerns over the cost of living.
Sunak remains optimistic about the UK’s economic growth and investment prospects, despite the OBR’s recent downgrading of growth forecasts.
Read the original Bloomberg article HERE.
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Updated: 27 Nov 2023, 07:40 AM IST
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