LONDON (AP) 鈥� Britain鈥檚 Conservative government on Friday defended its decision to in the 鈥渟queezed middle鈥� class as it tries to shore up an economy battered by double-digit inflation and the of .
announced by Treasury chief Jeremy Hunt on Thursday includes 25 billion pounds ($30 billion) in tax hikes, including higher income tax for middle and top earners and steeper local household taxes. The Treasury acknowledged that the moves will take taxes as a share of national income to its highest level since World War II.
The combination of high inflation 鈥� predicted to be 9.1% for 2022, largely driven by soaring energy costs from Russia鈥檚 invasion of Ukraine 鈥� and stagnating salaries means a 7% decline in U.K. living standards over the next two years, according to the Office for Budget Responsibility, the government鈥檚 fiscal watchdog.
鈥淭he truth is, we just got a lot poorer,鈥� Paul Johnson, director of the Institute for Fiscal Studies think tank, said.
鈥淲e鈥檙e in for a long, hard, unpleasant journey,鈥� he added, with 鈥渉igh borrowing, high debt, high tax and public spending under strain.鈥�
Hunt reversed the billions of pounds in unfunded tax cuts announced by his predecessor Kwasi Kwarteng less than two months ago 鈥� a package that spooked financial markets, sent the pound plunging to and forced
Hunt also renounced the central principle touted by Kwarteng and Truss: that lower taxes are the key to economic growth.
鈥淪ound money matters more than low taxes,鈥� he said. 鈥淣one of this is easy, but it鈥檚 the right thing to do.鈥�
The emergency budget largely postponed public spending cuts until 2025 鈥� after the next national election 鈥� and promised more money for key areas including education and health. Hunt also included help for British , raising pensions and welfare benefits in line with inflation and boosting the minimum wage by 9.7%.
But millions of people in the U.K. face higher energy bills in the spring, when the government plans to cut back on support that has capped the average household鈥檚 utility bill at 2,500 pounds ($3,000) a year 鈥� more than double what it was a year ago. Bills are expected to increase to 3,000 pounds ($3,575) a year on average.
Hunt said the steps he was taking meant a predicted recession would be 鈥渟hallower鈥� than it otherwise would have been.
But some Conservatives grumbled that Hunt was abandoning the right-of-center party鈥檚 longstanding commitment to low taxes. And Friday鈥檚 headlines made bleak reading. 鈥淐arnage鈥� was the Daily Mirror鈥檚 front-page verdict. The Metro blared 鈥淵ou鈥檝e never had it so bad,鈥� while the generally Conservative-supporting Daily Mail said accusingly: 鈥淭ories soak the strivers.鈥�
Consumer affairs expert Martin Lewis said the worst is still to come for many people.
鈥淣ext spring, we are going to have this perfect storm of energy bills going up, cost of living continuing to rise and energy bills at their peak,鈥� Lewis told radio station LBC. 鈥淢y concern is what do we do to get people over that hump.鈥�
Some Britons are worried but willing to give Hunt and Prime Minister 鈥� who took office last month after Truss was forced to resign over her botched budget 鈥� the benefit of the doubt.
鈥淭hings seem a lot calmer,鈥� London resident Jo Thornton said. 鈥淚 mean, it couldn鈥檛 have got any worse. So, fingers crossed. Rishi has my backing, I think he鈥檚 doing a good job. So, yeah, I wish him luck.鈥�
Jill Lawless, The Associated Press
