As the UK economy heads for recession, Rishi Sunak is believed to be planning a new round of spending cuts to try and bring the public finances under control. The Prime Minister is under pressure to tackle the cost-of-living crisis affecting millions of Britons. Reports have indicated that Mr Sunak will opt for austerity, which will mean cuts to public spending to try and fill the £40billion ‘black hole’ in the economy.
Upon taking office, Mr Sunak strongly hinted that he will cut spending as he warned that “difficult” decisions are on the horizon. But Richard Murphy, a professor at Sheffield University’s School of Management, told Express.co.uk that austerity is the wrong path to take as it could cause public services to collapse.
He added: “Austerity at this moment would create collapsing public services, people unable to pay their bills, and increased unemployment. Not spending is the way to put us into a death spiral as an economy.”
Professor Murphy isn’t alone. This week, the United Nations’ poverty envoy also warned Prime Minister Sunak that this is the “worst time” for austerity. Olivier de Schutter added that he was “extremely troubled” by the idea that the UK could cut spending.
He told Parliament: “We are a country that funds our promises and pays our debts and when that is questioned – as it has been – this Government will take the difficult decisions necessary to ensure there is trust and confidence in our national finances. That means decisions of eye-watering difficulty.”
Mr Hunt had just announced he was to scrap April’s planned 1p cut to the basic rate of income tax, dropped a 1.25 percentage point cut in dividend tax also planned for April, and announced that a two-year plan to cap the cost of energy will now end at the turn of the financial year.
After raising interest rates by 0.75 percent on Thursday, the Bank of England warned that the UK is bracing for the longest recession in 100 years. Andrew Bailey, the Bank’s governor, said: “We can’t make promises about future interest rates, but based on where we stand today, we think the bank rate will have to go up by less than currently priced in financial markets.
DON’T MISS
Rishi Sunak under pressure as triple lock backed in new poll [INSIGHT]
Rishi Sunak sent huge warning by Just Stop Oil ahead of COP27 [ANALYSIS]
Rishi Sunak urged to commit to climate crisis fight ahead of COP27 [INSIGHT]
“If we do not act forcefully now it will be worse later on.”
Chancellor Hunt supported the decision saying that “inflation is the enemy” and the Bank has “taken action in line with their objective to return inflation to target.”
However, Labour’s Shadow Chancellor, Rachel Reeves, expressed concerns about the rising costs of mortgages. She said: “Families now face higher mortgages and more anxiety after months of economic chaos.
“Working people are paying the price for Tory failure. Britain deserves more than this.”
