British finance minister Jeremy Hunt challenged critics within the Conservative Party who are unhappy with his plan for higher taxes, saying on Friday that his new budget was needed to tackle inflation now running at a four-decade high.
Hunt announced tax increases and tighter public spending on Thursday, saying he had to bring down inflation which has surged since Russia’s invasion of Ukraine compounded global supply chain disruptions that have persisted after the COVID pandemic.
Britain’s budget forecasters said households faced a record hit to living standards over the next two years – the run-up to an expected general election – as the jump in inflation, which hit a 41-year high of 11.1% in October, erodes incomes.
“Over the next two years it is going to be challenging, but I think people want a government that is taking difficult decisions, has a plan that will bring down inflation, stop those big rises in the cost of energy bills and the weekly shop,” Hunt told Sky News.
“None of this is easy, but it’s the right thing to do.”
Hunt said he deferred most of the curbs on spending because cutting now would make the current recession worse.
Asked whether Hunt’s Conservative Party would support his moves to increase taxes at a time when the economy is shrinking, the finance minister said he had no choice but to take difficult decisions.
“There is nothing Conservative about spending money that you haven’t got,” he said. “There is nothing Conservative about not tackling inflation. There’s nothing Conservative about ducking difficult decisions that put the economy on track.”
RUMBLINGS OF DISCONTENT
But there have been rumblings of discontent from some senior members of the party, which has been in government since 2010.
“What I’m concerned about is that we are setting our tax policy on forecasts that have historically been wildly inaccurate, and that what we actually need to be doing is having a strategy for growth and looking to lower taxes,” Jacob Rees-Mogg, a leading minister during Liz Truss’s brief premiership, told Channel 4 News.
Newspaper front pages reflected the gloom, with the Conservative-supporting Daily Mail describing Hunt’s plan as a “Budget to break the back of Middle Britain”. The front page of the Financial Times declared “Hunt paves way for years of pain”.
Paul Johnson, director of the Institute for Fiscal Studies think-tank, said Hunt’s plans included more spending in the next two years before the cutbacks, but that was overshadowed by the cost of servicing Britain’s 2.45 trillion-pound debt mountain.
“All of that borrowing we’ve done over the last many years is coming home to roost,” Johnson told BBC radio.
“We’re going to be stuck at 100 billion pounds a year being spent on debt interest in the medium term. And of course, when the economy is growing so dreadfully badly, there’s just much less money around.”
Britain’s fiscal watchdog, the Office for Budget Responsibility, said on Thursday that Hunt was on track to meet a new target that he set for the government of bringing down public debt as a share of economic output within five years.