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UK faces 50 billion pound fiscal hole, government sources say


UK faces 50 billion pound fiscal hole, government sources say By Reuters

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Economy 7 minutes ago (Nov 07, 2022 12:12)

© Reuters. FILE PHOTO: Woman holds British Pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

By Elizabeth Piper and David Milliken

LONDON (Reuters) – British finance minister Jeremy Hunt will seek to fill a 50 billion pound ($57 billion) hole in the country’s public finances with around 30 billion pounds of spending cuts and 20 billion in tax rises, two government sources said on Monday.

Hunt is due to present a fiscal statement to parliament on Nov. 17, in a bid to restore financial market confidence after his predecessor Kwasi Kwarteng’s Sept. 23 tax cutting plan pushed sterling to a record low against the U.S. dollar and ultimately forced Liz Truss to resign as prime minister.

Britain’s Guardian newspaper reported on Sunday that early drafts of Hunt’s statement included up to 35 billion pounds of spending cuts and 25 billion pounds of tax rises, while on Monday the Financial Times gave figures of 33 billion pounds and 21 billion pounds respectively.

Asked about these estimates, two government sources told Reuters that they were within the right ballpark, but that final figures were subject to change.

Britain’s finance ministry declined to comment on the Guardian estimate on Sunday, and did not immediately respond to a request for comment on the FT estimate.

Last week a finance ministry source said broad-based tax rises were likely to fill a “fiscal black hole”.

Britain’s last set of budget forecasts were published in March, when they showed 28 billion pounds of headroom to meet a government target to reduce debt as a share of the economy.

Most of the 45 billion pounds of unfunded tax cuts which Kwarteng announced were rapidly reversed, apart from a 16 billion pound cut in payroll taxes which took effect on Nov. 6.

Short-term government borrowing costs are broadly back to where they were before Kwarteng’s statement, but longer-term borrowing costs are somewhat higher, and the economic outlook is bleak.

($1 = 0.8728 pounds)

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