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The new official takes office with three major actions! The new British finance minister will launch a fiscal package, and the pound is expected to be boosted

2024-07-30

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Britain's new finance minister, Reeves, told parliament that her Conservative predecessor had left a £21.9 billion ($28 billion) deficit and announced £5.5 billion in immediate spending cuts.

Britain's new finance minister will cut spending

Reeves plans to cut another £8.1 billion in spending in the next fiscal year and promised more measures when the full budget is announced on October 30, when the newly elected Labour government will need to make "tough decisions", including on tax.

Part of the cost comes from Reeves' decision to increase public sector pay by a total of £9.1 billion, following recommendations from independent pay setting bodies that she said the Conservatives had long ignored.

Reeves said the public finance situation was unsustainable and would threaten economic stability if left unchecked, so difficult decisions must be made now to make further savings during the year.

Reeves inherited a mess, with Britain's economic growth weak, public sector net debt at its highest level since the early 1960s, and the tax burden about to hit a nearly 80-year high.

The previous government also faced strike action in several areas of the public sector, and Reeves said she would accept recommendations to give workers such as teachers and health care staff a pay rise above the rate of inflation.

In a statement, Reeves accused the previous Conservative government of hiding the true extent of government spending and said she needed to make difficult decisions to prevent this year's budget deficit from swelling by 25%. Critics saw this as paving the way for future tax increases.

She cut a series of projects such as road construction and railway repairs, said she would review a plan to rebuild hospitals, and set an ambitious target for government departments to squeeze more than 3 billion pounds from the budget.

She also said she would stop paying high-income pensioners an annual heating bill, saving about 1.5 billion pounds a year.

The new government will also introduce tax increases

Reeves commissioned a review of public finances after taking office and used her speech in parliament to attack the previous government, which was led at different stages by Sunak, Truss and Johnson.

"They promised solutions they knew they would never find the money to support: roads that would never be built, public transport that would never be available, hospitals that would never be able to treat a single patient," Reeves said.

The Conservatives dismissed her accusations as an excuse for Labour to raise taxes.

Hunt, a former Conservative chancellor, said: "Today's series of actions are not based on economic considerations, but on political considerations. She wants to blame the previous Conservative government for the tax increases and project cancellations she has been planning."

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said some funding pressures did seem to be greater than expected. "Some of the specific details are really shocking and raise some difficult questions for the previous government," he said.

The non-partisan Office for Budget Responsibility, which reviews the government's tax and spending plans, said it would review how Hunt's March budget was prepared and called it a serious problem.

Reeves stressed that she intended to stick to her party's campaign promise not to increase income tax, VAT and other major taxes.

Any other tax changes will be announced in the formal budget statement in October, which Reeves said will include a new set of non-negotiable fiscal rules.

From the above news, we can see that the new British government is committed to fiscal reform after taking office, which will help improve the economic situation and boost market confidence, thereby supporting the pound. Investors need to pay attention to this.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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The new official takes office with three major actions! The new British finance minister will launch a fiscal package, and the pound is expected to be boosted

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