UK Prime Minister Rishi Sunak clears his first major test fire in the eyes of the market Investors have reacted coolly to the new tax plan, which sees a £25,000 million increase in the cornerstone tax and cuts in spending of up to £30,000 million (about €63,000 million in total). A program with which it seeks to gain the confidence of the markets and which has credit control as one of its main pillars. Even then, It will not happen till after the 2024 electionsWhen the ‘Tories’ risk their continuity in Downing Street.
According to the program presented by the Conservatives, the United Kingdom will go into debt £177bn this year, equivalent to 7% of GDP, while next year growth will be 5.5%. it won’t happen until 2025-2026 period after election hangoverwhen the United Kingdom’s accumulated debt begins to fall to the 97.6% it will be placed in 97.3% in the period 2027-2028,
In short, Sunak’s first criticism comes from the cool side when it comes to loan contracts and is accused of UK government will push for deferred cutsSince most of these measures will be taken after 2024. Schroders calls their offer “disappointing” and expresses regret “Many” of the initiatives “do little to stop it”, “A similar approach has been taken as in the past: borrow now, promise to borrow less in the future. But at least with this tax statement, there is a promise to tighten your belt at some point,” he remarked.
Despite this, markets have reacted relatively calmly to the decision, following Sunak’s efforts to gain acceptance. The pound was trading around $1.14 this Thursday, while the yield on the ten-year bond has been responded with a slight increase of 1.59%up to 3.19%, remaining about one and a half points below the maximum 4.5% (unprecedented handicap since 2008) He came into play in the midst of a financial storm caused by the erratic decisions of Liz Truss. The movement in the stock market has also been minimal and this Thursday the FTSE day closed Practically flat after falling a modest 0.06%.
Silvia Dell’Angelo, senior economist at Federated Hermes, believes that Finance Minister Jeremy Hunt, the architect of these measures, has achieved a “delicate” balance between short-term funding – in the form of energy subsidies – and short-term stability. “For now it suffices to convey the feeling that the current executive takes fiscal stability issues seriously,” he said, highlighting the response “Limited” from the financial markets as a sign of confidence in the fiscally conservative credentials of the new government, at least for now.
UK chooses to raise taxes
The British ‘Autumn Declaration’ measures a reduction between its most immediate star of £150,000 to £125,140, the threshold at which the highest income tax band will start to apply, which is around 45% and will increase by ten points, up to 35%Temporary tax on extraordinary profits of energy companies, which will be in force until 2028. exemption from capital gains tax by 2024 to 3,000 pounds. For his part, Hunt keeps the minimum income and inheritance tax bases stable for a period of about six years.
The program is based on pillars such as financial stability, taking into account the Office of Budget Responsibility (OBR) projections. protection of public services and economic development. In this sense, Hunt reiterates that the measures are implemented after a recession in the country and with a Contraction scenario of 1.4% As for the next year, which will last barely twelve months, as it begins to recover to close at 1.3% within two years, eight tenths less than anticipated.
Analysts are unclear whether the announcement includes enough measures to address “low growth in the country” and higher inflation than expected. The government’s new macroeconomic picture contemplates a 9.1% increase in price At the end of the current fiscal year, nearly two points above the previously estimated (7.4%) and 7.4% in 2023, compared to 4% initially expected. “While the fiscal statement has to some extent addressed concerns about debt sustainability and Short term emergency of high energy pricesThe problem of limited productivity growth looms large over us and is a potential source of new fiscal disappointments in the future”, explains Dol Angelo.