Minister defends tax hikes for U.K.

LONDON — Britain’s Conservative government on Friday defended its decision to hike taxes for millions of working people in the “squeezed middle” class as it tries to shore up an economy battered by doubledigit inflation and the reckless tax-cutting of recently ousted Prime Minister Liz Truss.

An emergency budget announced by Treasury chief Jeremy Hunt on Thursday includes 25 billion pounds ($30 billion) in tax hikes, including higher income tax for middle and top earners and steeper local household taxes. The Treasury acknowledged that the moves will take taxes as a share of national income to its highest level since World War II.

The combination of high inflation — predicted to be 9.1% for 2022, largely driven by soaring energy costs from Russia’s invasion of Ukraine — and stagnating salaries means a 7% decline in U.K. living standards over the next two years, according to the Office for Budget Responsibility, the government’s fiscal watchdog.

Hunt reversed the billions of pounds in unfunded tax cuts announced by his predecessor Kwasi Kwarteng less than two months ago — a package that shook financial markets, sent the pound plunging to a record low against the U.S. dollar and forced emergency intervention from the Bank of England.

Hunt also renounced the central principle touted by Kwarteng and Truss: that lower taxes are the key to economic growth.

The budget largely postponed public spending cuts until 2025 and promised more money for key areas including education and health. Hunt also included help for British society’s most vulnerable, raising pensions and welfare benefits in line with inflation and boosting the minimum wage by 9.7%.