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Britain's sharp tightening of fiscal policy may exacerbate economic difficulties

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Xinhua News Agency, Beijing, November 23. "Economic Information Daily" published Zhao Xiuzhi's article "Britain's Sharp Tightening of Fiscal Policy May Exacerbate Economic Difficulties" on the 23rd. The abstract of the article is as follows:

British Chancellor of the Exchequer Jeremy Hunt announced the autumn budget in Parliament a few days ago, saying that the British government will increase taxes and reduce fiscal expenditures in the next few years. Analysts pointed out that a substantial tightening of fiscal policy against the background of the bleak economic outlook in the UK may exacerbate the recession, and the cost of living crisis for the people will continue.

This combination of "increasing taxes and cutting spending" is the exact opposite of the previous Truss administration's budget that advocated massive tax cuts. The budget introduced at the end of September had aroused concerns about the further expansion of the UK's debt, leading to a series of crises such as the sharp drop in the exchange rate of the pound against the US dollar and the surge in the yield of long-term British government bonds, and became the direct cause of Truss' resignation.

According to the latest forecast report released by the UK Office for Budget Responsibility on the 17th, as high inflation and rising interest rates put pressure on demand, the UK economy will enter a recession that will last for more than a year starting from the third quarter of 2022.

"The market initially responded well to Hunter's solid performance. But now, they believe that Hunter may overcorrect and will kill the current economic growth," said Marcus Brooks, investment director at London-based investment management company Quilter.

The National Institute for Economic and Social Research, a British think tank, criticized Hunt's autumn budget for not providing enough help for the British people in crisis. "Increasing tax burdens, rising energy prices and wages not keeping up with inflation will make things worse for British households," the think tank said.

(Editors in charge: Yu Yang, Cui Yue)

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