UK to unveil emergency budget amid big demands but with almost no money

London: Pledging to face economic turmoil, Britain’s new government is set to offer an emergency budget featuring tens of billions in spending cuts and tax increases on Thursday as it seeks to restore the UK’s economic credibility and patch up the nation’s battered finances. Just three weeks after taking office, Indian-origin Britain Prime Minister Rishi Sunak faces the challenge of balancing the country’s budget while aiding millions of people suffering by a cost-of-living crisis as a result of Russia’s aggression in Ukraine that is driving up energy prices and slowing economic growth. “Today’s statement will help deliver the long-term stability this country needs,” Sunak promised in a promotional video released ahead of the statement. Treasury chief Jeremy Hunt will address the House of Commons with a speech outlining the strategy for dealing with a faltering economy. According to British media, he is expected to announce 30 billion pounds ($36 billion) in spending cuts and tax increases totalling 24 billion pounds. In order to assist consumers who are struggling with rising natural gas and electricity prices, he is likely to announce an expansion of a tax on the windfall profits of energy companies. The government also may delay plans to raise the thresholds for higher income tax brackets that may increase revenue from individual taxpayers as their pay brackets rise with inflation. Following the announcement of unfunded tax cuts totalling 45 billion pounds ($53 billion) by former Prime Minister Liz Truss, which torpedoed investor confidence, sent the pound to record lows against the U.S. dollar and sparked emergency central bank intervention, the emergency budget statement aims to restore the government’s financial as well as political credibility. Notably, Truss was forced to resign six weeks after taking office. According to Torsten Bell, chief executive of the Resolution Foundation, a think tank that works to raise the standard of life for low- and middle-income people, the government will find it difficult to accommodate all of the competing demands. “The uncomfortable reality is that unless global energy price rises reverse, we will remain poorer as a country than we’d hoped to be,” Bell wrote this week. “The world is as it is, not as we would like it to be, but the question is how well we wrestle with that reality.” This entails juggling the demands of nurses, police officers, border guards and civil servants who are all clamouring for salary raises after inflation accelerated to a 41-year high of 11.1% in October. Welfare recipients and pensioners also are looking for higher payments, and low-income families are calling for an expansion of the free school lunch program. However, resources are limited, with Sunak facing a budget shortfall of at least 40 billion pounds ($47 billion). Hunt will reiterate his commitment to fairness as the government balances its books, “ensuring support for the most vulnerable and seeing that those with the broadest shoulders bear the heaviest load,” the Treasury said in a statement. The budget comes against a grim backdrop of the Russia-Ukraine war, aftershocks from the COVID-19 pandemic and the economic strains of Britain’s exit from the European Union all weighing on the UK economy. It should be mentioned here that the economic output shrank by 0.2% in the third quarter, and the Bank of England predicted a recession that could last as long as two years. The British government is also paying the price for the unfunded tax cuts announced by Truss, which damaged Britain’s reputation for financial discipline and boosted government borrowing costs. Hunt and Sunak, who replaced Truss as Conservative Party leader and Prime Minister last month, have reversed most of Truss’ policies while pledging that the government will pay its bills and start reducing debts built up over the past 15 years. UK public debt ballooned to almost 83% of economic output in 2017 from less than 36% in the year 2007 as the government bailed out banks and struggled to bolster the economy. A decade of budget tightening had started to reduce the burden when the COVID-19 pandemic and Russia-Ukraine war pushed debt to 98% of gross domestic product, which is the highest since 1963 when Britain was still recovering from World War II. Additionally, some economists caution against moving too fast to reduce government debt at a time when rising food, energy and housing costs are set to wipe out the savings of a fifth of British households. According to a report from the independent National Institute for Social and Economic Research, now that most of Truss’ policies are reversed, the current government should be able to close the remaining budget shortfall with “relatively small” policy adjustments that won’t jeopardize investment needed to spur economic growth. “The bigger danger now is that we decide collectively to demonstrate fiscal credibility by adopting an excessively restrictive fiscal policy and limit support for poor households or rein in critically important elements of public investment,” institute Director Jagjit Chadha said in the report. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.