[TheEpochTimes19novembre2022](Interview and report by Li Siqi, Epoch Times Special Department reporter) The annual growth of the UK’s consumer price index (CPI) in October11.1%, a maximum of 41 years. Released in the UK on November 17thautumn budgetbasicallytax increaseAnd cut government spending, expect to control the inflation rate at 2% by the second quarter of 2024. Professionals believe such measures may not solve the underlying problem.
UK government in NovemberReleased on the 16thThe data show that the inflation rate continued to rise in October: in 12 months the CPI increased by 11.1%, higher than the 10.1% in September, the consumer price index ( CPIH), which includes housing costs, increased by 9.6% %, from 8.8% in September. In October, the largest contributors to the CPIH were housing and household energy (electricity, natural gas and other fuels), as well as food, soft drinks and transportation costs.
On November 17, Jeremy Hunt, the new British Chancellor of the Exchequer, announced his firstbudget case——”Autumn Statement 2022″ (Autumn Statement 2022, called Autumn Budget). The Autumn Budget said the UK Treasury’s Office of Budget Responsibility (OBR) believes the UK has entered an economic recession since the third quarter.
OBR also stated,British economyShocks such as recessions typically occur every nine years, and a typical recession increases the debt-to-GDP ratio by an average of 10 percentage points. Furthermore, the UK is facing long-term structural changes, such as an aging population putting pressure on public finances, which will be felt in the coming decades.
Mike Sun, an investment strategist and expert on China, told The Epoch Times on Nov. 18: “The problems in the UK are structural and cannot be fixed in the short term. Unlike the US, the UKinflationThe interest rate is still high and the Bank of England still has plenty of room to raise interest rates. “
United States in Octoberrate of inflationIt was 7.7%, not only lower than September’s 8.2% but also lower than the 8.0% expected.
Mike Sun said: “The Fed has little room to raise interest rates and will raise interest rates again by 50 basis points next month. However, under fears of a possible economic downturn, interest rate hikes could stop in the second quarter of 2023. There could be In one scenario, the Fed stops raising rates and the UK keeps raising rates Continuing to raise rates hurts the economy, causing stagnation or even recession, ‘stagflation’ in the worst case”.
The so-called “stagflation” refers to stagflation, which is characterized by economic stagnation, but at the same time the inflation rate is high and the unemployment rate is rising.
for “lowerinflationand return the UK economy “to stability,” says Hunt’s autumn releasebudget caseIntroduced the largest in the UKtax increaseAndspending cutspolitics.
£25bn tax increase
The new prime minister, Rishi Sunak, took office with a different tax cut than his predecessor, Liz Truss. The Autumn Budget, released Nov. 17, reverses most of the policy, providing £25bn ($29.8bn) in tax increases and £30bn ($35.7bn) in cuts spending over the next five years to offset the £55 billion ($65.5 billion) fiscal deficit.
Part of the tax increase is as follows: from April 2023, the tax rate for corporate profits over £25,000 (approximately US$30,000) will rise to 25%; $180,000) to £125,140 ($150,000); freeze personal income tax credits, tax rate thresholds and National Insurance Tax (NIC) thresholds for second-tier employers until 2028.
The threshold freeze is considered a “stealth” tax increase, because although the tax rate has not increased, wages have increased under inflation, so the portion that needs to be taxed has also increased accordingly.
And from April 2021, the threshold for registering value added tax (VAT) of 85,000 pounds sterling (about 100,000 US dollars) will be frozen for two years; the tax exemption for dividends and investment dividends will be reduced; electric vehicles will not be exempt from April 2025 Vehicle Consumption Tax; the windfall profit tax for oil and gas companies is extended until March 2028, and the tax rate is increased from 25% to 35%; a temporary tax of 45% is imposed for e-commerce, etc.
Cut public spending by £30bn
The autumn budget plans to cut government spending by £30bn, becoming the first major Western economy to embark on a large-scale reduction in government spending. The Autumn Budget stated that the cuts in public expenditure had been made “responsibly” and “on principle”.
Specific measures such as: maintaining the share of foreign aid in GDP (0.5%); encourage people living on welfare to find work; reduce household energy bill subsidies, as of April 2023, the annual cap has increased by £500 (approximately $590) to £3,000 (approximately $3,570).
The UK government also plans to cut pension spending and plans to raise the State Pension age over the next 25 years, which is currently under review. The fall budget said it was important to consider balancing relevant factors such as fiscal sustainability, the state of the economy, updated life expectancy, and how it would be fair for retirees and taxpayers.
Although the purpose of the fall budget is to bring down inflation, Chu Hanshi, a Chinese finance expert in the UK, told The Epoch Times on Nov. 18 that income is rising andspending cuts“It doesn’t solve the fundamental problem” and “inflation should continue”.
He explained: “Inflation in the UK shows rising energy and food prices. The main cause is supply chain problems caused by the war between Russia and Ukraine, and labor shortages caused by Brexit.” and sharply rising labor costs. The UK itself is not a food and energy producing country. Therefore, raising interest rates and cutting spending cannot solve the fundamental problem and inflation should to continue”.
“The United States is not the same. The United States sends money to make people too rich. Demand has greatly increased and supply is insufficient. Therefore, the United States raises interest rates and tightens the balance sheet to recover liquidity It’s the right medicine for the case.”
The Autumn Budget also says that the OBR expects inflation to peak at 11.1% in the fourth quarter of this year and fall to 3.8% in the fourth quarter of next year, and the time to fall to 2% target will take until Q2 2024, and then wait Time to turn negative is Q3 2024 to Q2 2026, when energy and food prices start to decrease.
OBR’s forecast for UK GDP growth is: 4.2% growth in 2022; decline of 1.4% in 2023; positive growth in 2024, 1.3%.
The rise in interest rates has also hit the housing market and investment in the UK. Mike Sun told The Epoch Times: “Rising interest rates are having a big impact on the UK property market, and UK house prices are also falling” and “in the long run, many investors continue to be pessimistic about the pound”.
The autumn budget expects UK house prices to fall by 9.0% between Q4 2022 and Q3 2024, returning to roughly the level of Q3 2021 in the UK.
Responsible editor: Lian Shuhua
