British Prime Minister Rishi Sunak has said that this week's autumn budget will deliver on market expectations, as his Chancellor warned everyone will need to pay “a bit more tax” to stabilise the economy.
Mr Sunak said measures to be unveiled on Thursday by Jeremy Hunt would “put our public finances on a sustainable trajectory” after investors were unnerved by his predecessor’s £45 billion ($53bn) tax-cutting bonanza.
It is expected the statement will include painful public spending cuts and tax rises to fill a gap in the nation’s finances.
Mr Hunt earlier said sacrifices were required across the board to get the economy back on track.
But the planned tax rises have drawn criticism from some quarters of the Conservative Party, with former levelling up secretary Simon Clarke calling for the books to be balanced through spending cuts.
Former chancellor Kwasi Kwarteng, whose mini-budget was estimated by economists to have cost the country as much as £30bn, said growth would not come from “putting up our taxes”.
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On the plane to Indonesia for the G20 summit, Mr Sunak said financial conditions in the UK had “clearly” steadied.
“But they have stabilised because people expect the government to take the decisions that will put our public finances on a sustainable trajectory, and it’s the government’s job to deliver on that,” he said.
“And that’s what the Chancellor will do.”
Mr Sunak said he recognised the dire economic situation the country was facing, after gross domestic product contracted by 0.2 per cent between July and September, potentially marking the start of a recession.
He stressed the importance of “delivering on the expectations of international markets” to “make sure that our fiscal position is on a more sustainable trajectory”.
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Mr Sunak said the plan was to “lay the foundations” for growth so taxes could be cut “over time”.
“The Chancellor has also said that part of our job is not just to bring stability back to the system, which we will do, but it’s also to lay the foundations for the economy to recover and grow,” he said.
“That’s how we’re going to be able to cut people’s taxes over time and support public services. And you’ll hear that side of the equation from the Chancellor as well.”
Mr Sunak will return to the UK from the gathering of the leaders of major economies in Bali just in time for the budget on Thursday.
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Mr Hunt has said “people with the broadest shoulders will bear the heaviest burden” as he is understood to be considering a cut to the threshold at which the highest earners start paying the top rate of tax.
The Resolution Foundation think tank’s economists estimate that former prime minister Liz Truss and Mr Kwarteng blew £20bn on unfunded cuts to national insurance and stamp duty, with a further £10bn lost to higher interest rates and government borrowing costs, The Observer reported.
At the G20 summit, Mr Sunak evaded questions about whether that figure was correct and whether he would use the UK’s recent experience as a lesson in how things could go wrong.
“I think I said on the steps of Downing Street that mistakes were made and part of the reason I became prime minister was to fix that,” he said.
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He pointed to global economic challenges such as soaring inflation after the Covid pandemic and Russia’s invasion of Ukraine.
“Those are shared challenges and what I’ll be talking about at the G20 with other leaders is what everyone is doing in their own countries and internationally to ensure resilience and stability in the financial system.”