UK hikes taxes, trims spending to fill budget hole

STORY: UK finance minister Jeremy Hunt announced a string of tax hikes on Thursday (November 17), as well as measures to tighten public spending.

The moves came in a plan set out to parliament.

Hunt said it was necessary to restore faith in policymaking and public finances after the short-lived premiership of Liz Truss:

''But Mr. Speaker, credibility cannot be taken for granted and yesterday's inflation figures show we must continue a relentless fight to bring it down, including a rock-solid commitment to rebuild our public finances."

Headline moves include a freeze on income tax allowances, meaning more people will pay the basic rate.

Hunt also lowered the threshold for paying the top rate, and cut tax-free allowances for earnings from dividends.

He increased a windfall tax on oil and gas firms, and extended it to power generators.

"I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices."

In all the new tax hikes and spending cuts are meant to close a budget hole put at £55 billion, or about $65 billion.

Hunt said the country was already in recession, and government departments would need to find ways to save money.

Plans to increase defense spending were postponed, while he ruled out restoring the overseas aid budget.

Support for household energy bills was trimmed.

But he denied that the plans amounted to a return of austerity, saying the the National Health Service would get extra funding.

Other public spending will be protected “as much as possible”.

The opposition Labour Party said the economy was in a “mess”, as result of the government’s mistakes.

Markets gave a muted reaction to the plans, with sterling and government bonds edging lower.