While speaking to the BBC before this year’s budget statement, U.K. Treasury chief George Osborne stated that the forecasts for the world economy had worsened since he posed tax and spending estimates last November and that other actions were necessary to fight the budget deficit.
The Chancellor of the Exchequer announced that he plans to bring more details on Wednesday regarding new savings that would reduce expected public spending by an additional 0.5% off each year over the next four years to let him meet his target of bringing the U.K.’s public finances into surplus.
The chancellor’s effort to wring public expenses follows growth below forecasts and tax earnings that according to economists are threatening his goal of abolition deficit of Britain’s budget before the end of the five-year parliament.
Wednesday’s budget is coming as Britain is getting ready to vote in a referendum on the question of whether to stay as a member of the EU. George Osborne, like his partner Prime Minister David Cameron, is agitating for the U.K. to remain in the union. Experts suggest that uncertainty about the vote’s results risks disrupting growth, and also Mark Carney, governor of the Bank of England, said to lawmakers last week that the vote is the greatest local risk to U.K. financial stability.
Supporters of quitting the EU suggest such worries are overblown, and the Britain will be successful if it leaves the bloc.
The chancellor’s caution at the beginning of 2016 that the U.K. encountered a “dangerous cocktail” of risks in the world economy has been complicated by worsening expectations regarding the size of the U.K. economy, with an £18 billion black hole.
Mr. Osborne is ready to hit his fiscal rule of reaching a budget surplus over the four-year period, making him increase taxes now and leave spending reductions for later in order to keep the goal in sight.
For revenue-raising action, speculation has concentrated on higher tax rates on insurance premiums, an inflation-connected increase to fuel duty and the opportunity of an enlargement in the bank earnings tax.
The chancellor also plans to keep up the attack on multinationals regarding tax avoidance, following Google’s tax case this year.
At the same time, Tory MPs have already made him throw out plans for a shake-up of the pension system and the Prime Minister has hurried his chancellor on to do something that could compound the EU vote campaign.
To soften what’s going to be a tough budget, George Osborne will probably speed up progress on increasing the personal tax allowance to £12,500 and enlarging the threshold on the 40% tax rate to a goal of £50,000.
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