UK's new fiscal plan aims to reintroduce stability after mini-budget fiasco, expert says

Chancellor of the Exchequer Jeremy Hunt of the United Kingdom (UK) leaves 11 Downing Street in London, Britain, on Nov. 17, 2022. (Xinhua)

Hunt's aim was to "assure the markets that the UK is properly run by the new Prime Minister, Rishi Sunak, and by his team of advisers," Professor Simon Tormey, dean of the Faculty of Social Sciences and Law at University of Bristol, said.

LONDON, Nov. 21 (Xinhua) -- In his Autumn Statement 2022 delivered to the United Kingdom (UK) Parliament on Nov. 17, Chancellor of the Exchequer Jeremy Hunt sought to undo the damage caused by his predecessor Kwasi Kwarteng's ill-fated "plan for growth," reintroduce stability and rebuild confidence in the markets, a leading British scholar explained to Xinhua.

Hunt's aim was to "assure the markets that the UK is properly run by the new Prime Minister, Rishi Sunak, and by his team of advisers," Professor Simon Tormey, dean of the Faculty of Social Sciences and Law at University of Bristol, said.

A man walks out a store in Basingstoke, Britain on Nov. 13, 2022. (Photo by Tim Ireland/Xinhua)

Last Thursday, Hunt announced a package of tax hikes and spending cuts worth 55 billion British pounds (65 billion U.S. dollars). The government extended windfall taxes on oil and gas companies' profits, reduced the top rate of income tax and increased the minimum wage.

The measures came after a large-scale package of unfunded tax cuts announced by the previous government led by former Prime Minister Liz Truss in September threw financial markets into turmoil. The giveaway measures were expected to ramp up public borrowing but they dealt a huge blow to the country's fiscal reputation.

"What we're seeing here is what they might call a return to fiscal orthodoxy, a way in which we recognize the economic realities faced by Britain and plot a way forward in terms of how to pay the debt and put the economy on a reasonably stable footing," Tormey said.

A smart energy meter is seen in a household in Manchester, Britain, Sept. 2, 2022. (Photo by Jon Super/Xinhua)

Referring to the COVID-19 pandemic's impact on the economy followed by rocketing energy prices and a cost-of-living crisis, Tormey said the country is in the middle of stagflation (combination of economic stagnation and high inflation).

"If we can get through the rest of this year, 2023 is going to be very tough with the global economic situation, recession in Europe and recession in the UK," Tormey said.

According to the fiscal watchdog Office for Budget Responsibility (OBR), the UK is now in recession. Overall, the economy is still forecast to grow by 4.2 percent this year, but gross domestic product (GDP) is forecast to fall by 1.4 percent in 2023.

Tormey likened Hunt's budget and his accompanying statements to those the main opposition Labour Party would present under similar circumstances, adding "what we've got here is in a sense a recognition of the situation that Britain is in."

Photo taken on Aug. 21, 2022 shows a gas station in Reading, Britain. (Photo by Tim Ireland/Xinhua)

Tormey said the man in the street is still recovering from the shock caused by Truss's 44-day tenure. Truss was the country's shortest-serving prime minister.

"What this budget is about is Sunak and Hunt in the Conservative administration saying that mistakes have been made but now the grown-ups are in charge," Tormey said.

The message from the prime minister and the chancellor is "stick with us for 18 months and we will see an upturn in 2024 and that will stabilize prices, inflation will come down, economic growth will resume and people will feel better off."