Sunak eyes as much as $81.5b of British spending cuts, tax rises

LONDON Britains Prime Minister Rishi Sunak is seeking to build a buffer in the public finances as he draws up an economic plan to plug the countrys budget shortfall, which could entail tax rises and spending cuts totalling as much as 50 billion (S$81.5 billion).

Sunak and Chancellor of the Exchequer Jeremy Hunt want the extra headroom over and above Britains 35 billion fiscal hole so that the package has credibility with the markets, an official familiar with the matter said.

Another said that could entail spending cuts and tax rises closer to 50 billion, a figure widely reported in the British media on Friday. Both spoke on condition of anonymity because the plans are unpublished.

Britains new premier is trying to restore calm to the financial markets after his predecessor, Liz Truss, sparked turmoil during her 7-week tenure.

She introduced a massive package of unfunded tax cuts that tanked the pound to an all-time low against the dollar and sank the gilts market.

Sunak and Hunt on Wednesday delayed a planned economic statement to Nov 17 from Oct 31 to give them more time to make what the premier described as the right decisions to manage the British economy.

The two men held a sober meeting on Thursday to run through their options, one of the officials said. They were shown recent data that demonstrated the markets had stabilised in recent days but that Britain still faces serious challenges.

Thats because growth is still depressed by high gas prices and stubborn supply chain issues as a result of the Covid-19 pandemic and Russias invasion of Ukraine.

Moreover, they were told that growth is likely to be considerably lower than the most recent official forecasts from the Office for Budget Responsibility, the person said. That will have the knock-on effect of lowering projections for tax revenue, increasing the size of the budget hole to fill, they said.

Sunak and Hunt are trying to chart a path to sustainable public finances thats likely to rein in some of the excesses of the previous two premiers.

As well as reversing much of Trusss tax cuts, some of her predecessor, Boris Johnsons infrastructure spending pledges are also likely to be under the microscope.

People familiar with the matter told Bloomberg earlier this week that the Treasury has drawn up a list of 104 options to cut spending. BLOOMBERG More On This Topic An emphasis on continuity: Whos who in Sunaks Cabinet Ultra-rich UK PM Sunak to move into Downing Street flat