Connect with us

World

Can 'new policies' lift the UK economy out of trouble? (Global Hotspot)

News Agencies

Published

on


On November 13, people walked past a closed shop for rent on the streets of Basingstoke, England.
Photo by Dan Ireland (Published by Xinhua News Agency)

On November 17, the British Ministry of Finance released the "Autumn Statement" containing the complete plan of the medium-term financial plan. This is the first budget plan released by the new government after it came to power. The purpose is to clarify the tax increase plan and restore the balance of public finances.

According to the British "Financial Times" website, the British inflation rate in October hit a 41-year high, accelerating to 11.1% driven by rising energy and food prices; among them, the annual inflation rate of food prices rose sharply to 16.5%, the highest rate in 45 years highest level.

Since the beginning of this year, affected by factors such as the new crown pneumonia epidemic and the conflict between Russia and Ukraine, the British economy has fallen into the predicament of high inflation, aggravated energy crisis and accelerated economic recession. In addition, the tax cut policy and energy subsidy plan of the former Prime Minister Truss government caused the British fiscal deficit to expand rapidly. The Sunak government has to face the double pressure of raising taxes and reducing government spending. This will undoubtedly make the British economy worse, and a long-term recession is inevitable.

Advertisement

Budget plan draws attention

On November 17, as soon as the British government's first budget plan was released, it attracted widespread attention.

"The 'Autumn Statement' is the first budget plan of the new British government, which is related to the taxation and expenditure plans for the next few years. The main measures include increasing taxes and reducing government spending, with the purpose of restoring the market's confidence in the development of the British economy, so that Investors believe that the UK’s debt situation is controllable and sustainable.” Yan Jin, executive director of the Center for European Studies at Renmin University of China, said in an interview with this reporter that the Sunak government’s top priority is to control inflation and increase taxes It is no easy task to strike a balance between reducing government spending and promoting economic development at the same time.

Advertisement

According to the latest data released by the Office for National Statistics of the United Kingdom, the UK's gross domestic product (GDP) in the third quarter of this year fell by 0.2% from the previous month. Among them, the GDP in September fell by 0.6%. The report released by the Office for National Statistics of the United Kingdom pointed out that the main reasons for the recession in the third quarter of the United Kingdom were the general decline in manufacturing, the poor performance of the service industry and the slowdown in the growth of the construction industry.

The UK is facing a historic cost of living crisis as continued soaring energy and commodity prices put a severe squeeze on real incomes. Bank of England data showed that the UK consumer price index (CPI) rose 10.1% in September. Inflation rose to 11.1% in October from 10.1% in September, the highest level since October 1981, according to data released by the Office for National Statistics. The cost of living across the UK has risen sharply despite the UK government's energy price guarantee. In the past year, the price of natural gas in the UK has risen by nearly 130%, and the price of electricity has increased by about 66%. British households in October have a ceiling of 2,500 pounds on gas and electricity.

In response to soaring inflation, the Bank of England raised its benchmark interest rate by 75 basis points on November 3, the largest rate hike since 1989. This is the eighth consecutive interest rate hike by the Bank of England since December last year, and the UK benchmark interest rate has been raised to 3%, the highest level since November 2008.

Advertisement

Cui Hongjian, director of the European Institute of the China Institute of International Studies, told our reporter that the fiscal policy of the Sunak government is first to correct deviations and solve the huge shock caused by the large-scale tax cuts of the Tesla government; secondly, it is to stabilize market expectations. , Convey confidence through comprehensive measures; Finally, strike a balance between tax cuts and tax collections, inflation suppression and economic growth.

Decreased self-control

The British economy's troubles are the result of a combination of multiple factors.

Advertisement

The economic predicament of the UK is closely related to the "strong earthquake" encountered by its political arena and financial market.

In a short period of time, the British Prime Minister changed hands twice, and the British government's fiscal policy also experienced a "big reversal". Kwasi Kwaten, who was the chancellor of the exchequer of the Telas government at the time, proposed the largest tax cut plan in the UK since 1970, which triggered a strong reaction from the market.

"Over the years, there have been many problems in the British economic structure, and the problem of industrial hollowing has appeared very early. The British have been trying to adjust the economic structure, trying to achieve a certain balance between the real economy and the virtual economy, but it has not been smooth. Plus The impact of Brexit, the new crown pneumonia epidemic, and the conflict between Russia and Ukraine have severely impacted the financial services industry on which the British economy depends." Cui Hongjian said that the challenges brought by Brexit to the British economy are far greater than the so-called "opportunities" claimed by his government. Since the start of the Brexit process, the UK's trade, investment and industrial policies have entered a period of adjustment, full of uncertainties. During the adjustment process, the UK has encountered many uncontrollable factors, such as the new crown pneumonia epidemic and the conflict between Russia and Ukraine. The period of adjustment coincides with the period of turmoil. Against the background of increasing external unfavorable factors, the UK's ability to independently control the direction of its development continues to decline.

Advertisement

"Currently, the British economy is in trouble, which is mainly caused by Brexit, the new crown pneumonia epidemic, and the conflict between Russia and Ukraine." Yan Jin believes that due to leaving the European Union, the United Kingdom is no longer a member of the European unified market and no longer enjoys the corresponding benefits. Preferential policies, changes in the rules for trading with the EU. This will inevitably lead to higher prices for imported goods in the UK and increased uncertainty in trade with the EU. Brexit has also weakened the UK's status as a world financial center, resulting in a continued weakening of its attractiveness to foreign capital. Affected by the new crown pneumonia epidemic, the British economy will experience its first recession in 10 years in 2020, with weak economic development and a weak labor market. After the outbreak of the Russia-Ukraine conflict, the United Kingdom imposed comprehensive sanctions on Russia, resulting in high energy prices, rising commodity prices, severe inflation, and supply chain disruptions. The UK's foreign trade deficit continued to expand, leading to a serious lack of market confidence and a continuous decline in household consumption.

Cui Hongjian believes that Brexit has consumed a lot of political and policy resources in the UK, but it has not solved the development issues and people's livelihood issues that the UK really needs to solve. Facing domestic economic problems, the UK should focus on structural reform and adjustment. But in the short term, not only is the British government unable to truly plan for the long-term development of the economy, it also has to get caught up in institutional entanglements due to political factors and party interests, and continue to consume political resources.

"In recent years, anti-globalization trends have risen in the UK, which has left the UK in a dilemma. Stick to openness or return to closure? British political decisions and economic policies have oscillated back and forth between the two. Brexit is the choice of the UK, which shows that its departure The attitude of unifying the market and the determination to readjust the direction of development. However, the closed and conservative sentiment of British populism will inevitably take advantage of the situation and interfere with the overall economic decision-making of the UK. Cui Hongjian analyzed that in order to achieve Brexit, the British government has proposed The slogan of "Global Britain" hopes that the UK will participate in global market competition through wider opening up. However, under the impact of populist trends, the British government has long been in the contradiction of using tax cuts or tax increases to deal with economic problems, and it is difficult to come up with more boldness to formulate a systematic response plan. This is one of the main reasons why the British economy is in trouble.

Advertisement

The economy may continue to deteriorate

According to British media estimates, the British fiscal gap is as high as more than 50 billion pounds. The goal of the British Treasury is to significantly reduce government debt within 5 years, which means that the tax burden faced by the British may further increase. According to the "Times" report, British Chancellor of the Exchequer Jeremy Hunt is currently considering three options: increasing the temporary tax rate for energy manufacturing, extending the tax time or adding power companies to the scope of tax collection. Energy companies reaping windfall profits from rising energy prices may be forced to make "sacrifices" to help fill the hole in Britain's public finances.

"The 'Autumn Statement' contains some relatively balanced and prudent tax schemes, which are mainly reflected in increasing income and reducing expenditure. On the one hand, the Sunak government must introduce a tax collection plan, and on the other hand, it must not arouse public dissatisfaction. It must be carefully balanced." Cui Hongjian The effect of the Sunak government's fiscal policy depends on whether the market and the public are willing to give trust and time.

Advertisement

The Bank of England predicts that starting from the third quarter of this year, the UK may enter the longest downturn cycle on record, and the economic recession may last until mid-2024. The UK economy will continue to deteriorate as inflation soars and interest rates rise, pushing unemployment up to 6.5% over the next two years. British Prime Minister Sunak said that the British economy will go through "difficult times".

Bank of England Governor Bailey said that it may take 18 months to two years to control inflation, and there may be multiple interest rate hikes in the next few months. British Chancellor of the Exchequer Jeremy Hunt warned that the road ahead is difficult and some extremely difficult decisions will need to be made.

"The British government needs to gradually get rid of the state of fighting each other and restraining each other. All departments should strengthen cooperation to form a mechanism plan to promote economic structural reforms to ensure the stability and effectiveness of policy implementation." Cui Hongjian believes that what the UK needs It may not be just a reform in the economic field, but an all-round reflection and adjustment to the profound contradictions in the entire society.

Advertisement

(Editors in charge: Yang Guangyu, Bai Yu)

Share for more people to see

The news is published by EMEA Tribune & Peoples Daily Online210520-twitter-verified-cs-70cdee.jpg (1500×750)

Continue Reading
Advertisement

Advertisement

Breaking News

Editor Pick’s

Latest Entertainment

Entertainment24 mins ago

‘Infinity Pool’ stars Mia Goth and Alexander Skarsgård on the bonkers X-rated scenes that shocked Sundance

Mia Goth takes aim in Brandon Cronenberg’s dark horror satire Infinity Pool. (Photo: Neon/Courtesy Everett Collection) Like father, like son....

Entertainment1 hour ago

The Last of Us officially renewed for season 2, and gamers know what that means

We haven’t heard the last of The Last of Us. HBO has officially renewed the post-apocalyptic drama starring Pedro Pascal...

Entertainment2 hours ago

Jay Leno’s very bad week: He breaks several bones in motorcycle crash as CNBC cancels ‘Jay Leno’s Garage’

Jay Leno broke his ribs in a motorcycle accident; days later, CNBC announced it canceled the late night legend’s show...

Entertainment4 hours ago

Harrison Ford Would ‘Love’ to Do a Project with Wife Calista Flockhart — But They ‘Haven’t Found One Yet’

Harrison Ford and Calista Flockhart attend the “1923” LA Premiere Screening & After Party Alberto E. Rodriguez/Getty Images Harrison Ford...

Entertainment5 hours ago

Sopranos Actor John Ventimiglia’s Daughter Odele Dead at 25

The family of The Sopranos actor John Ventimiglia is mourning the death of his daughter Odele Cape Ventimiglia. The 25-year-old...

Entertainment5 hours ago

Jay Leno Broke His Collarbone, Ribs and Kneecaps in Motorcycle Crash Last Week

Jay Leno is on the mend again! In an interview with the Las Vegas Review-Journal published Thursday, the comedian, 72, revealed...

Entertainment5 hours ago

Jay Leno Broke His Collarbone, Ribs & Kneecaps in Motorcycle Crash Last Week

Comedian Jay Leno attends the 2016 St. George Theatre Gala at St. George Theater on March 11, 2016 in New...

Entertainment5 hours ago

Pamela Anderson doc director says ‘Pam & Tommy’ ‘retraumatized’ her: ‘That was really difficult to watch her go through’

Pamela Anderson invited documentary maker Ryan White into her home for Netflix’s Pamela, A Love Story, which is out on...

Advertisement

Latest Sports

Sports48 mins ago

NFL betting: Two quarter bets to make for Bengals vs. Chiefs

Here are two ways to bet the Bengals vs. Chiefs matchup.

Sports1 hour ago

Rodgers to Jets starting to make too much sense

It’s all just another beautiful Aaron Rodgers mystery, these stars that are aligning between the veteran QB and the extremely...

Sports2 hours ago

NFL’s final four are doing what the league doesn’t want them to: resisting parity

The Chiefs, Bengals, Eagles and 49ers have all played in the Super Bowl within the past five seasons. Each has...

Sports2 hours ago

LeBron James drops 20 points against Spurs while approaching Kareem Abdul-Jabbar’s all-time scoring record

LeBron James and the Lakers beat the Spurs 113-104 on Wednesday night.

Sports2 hours ago

‘Nothing’ about Bengals offense impresses Chiefs LB Willie Gay

Joe Burrow's Bengals are 3-0 against the Chiefs the past two seasons.

Sports3 hours ago

Trevor Immelman embracing second act in golf as CBS’s new lead analyst: ‘I was blown away’

The former Masters winner and Presidents Cup captain will make his debut on Friday alongside Jim Nantz at the Farmers...

Sports3 hours ago

Miami fires offensive coordinator Josh Gattis after just one season

Miami's offense took a big step back in 2022 during Mario Cristobal's first season as coach.

Sports4 hours ago

Leon Draisaitl is NHL’s ‘Mr. Game-Winner’

This week, we look at Leon Draisaitl's clutch ability, a Canadiens goalie flying under the radar, the Bruins' incredible pace,...

Technology Hot News

Technology1 week ago

Led by "Amazon" and "Microsoft" .. the technology giants are planning to lay off 64,000 employees

After 10 years of driving the stock market bull run, big tech companies are racing to downsize staff to adapt...

Technology1 week ago

Apple introduces MacBooks with new M2 processors

Yesterday, Tuesday, Apple unveiled MacBooks powered by the new, faster “M2 Pro” and “M2 Max” processor chips, in a surprise...

Technology1 week ago

All you need to know about the upcoming Galaxy S23 phones from Samsung

Samsung has officially announced that the (Galaxy Unpacked 2023) event will be held this year on Wednesday, February 1, which...

Technology1 week ago

FTX Exchange Announces Hacking and Stolen $415 Million in Cryptocurrency

Bankrupt American cryptocurrency firm FTX announced today, Wednesday, that $415 million in cryptocurrency has been hacked and stolen from the...

Technology1 week ago

Because of a "fraudulent tweet"… Elon Musk's trial begins

Elon Musk's trial began Tuesday in San Francisco with the selection of jury members who will have to decide whether...

Technology1 week ago

An electric spoon replaces salt and spices, but with conditions

Experts have developed an electric spoon that is able to replace spices and flavors and affect the taste buds in...

Technology2 weeks ago

The biggest dangers of using tracking devices.. so you can escape?

If you spot an unknown Bluetooth tagging device, there are ways to disable the device so it can't track your...

Technology2 weeks ago

New Twitter.. For You tab to web version

The Twitter platform announced that it will bring the new tab (For You), which launched last Tuesday for iPhones and...

Advertisement