Rishi Sunak has said he will be “delivering on the expectations” of the financial markets in his autumn budget or risk being punished again.
The Prime Minister said Chancellor Jeremy Hunt will unveil measures on Thursday that will “put our public finances on a sustainable trajectory”, after their predecessors’ £45 billion tax-cutting bonanza unleashed market turmoil.
The autumn statement is expected to include painful public spending cuts and tax hikes to plug the massive black hole in the nation’s finances.
Mr Hunt earlier warned everyone will need to pay “a bit more tax” and that “sacrifices” are required across the board to get the economy back on track.
But the planned tax hikes have drawn criticism from some quarters of the Tory party, with former levelling up secretary Simon Clarke calling for the books to be balanced through spending cuts instead.
Ex-chancellor Kwasi Kwarteng, whose disastrous mini-budget economists believe may have cost the country as much as £30 billion, said economic growth would not stem from “putting up our taxes”.
Speaking to reporters on the plane to Indonesia for the G20 summit, Mr Sunak said: “Financial conditions in the UK have stabilised clearly, but they have stabilised because people expect the Government to take the decisions that will put our public finances on a sustainable trajectory, and it’s the Government’s job to deliver on that.
“And that’s what the Chancellor will do.”
The Prime Minister said he was “cognisant” of the dire economic situation the country is facing, after gross domestic product – the measure of national income known as GDP – contracted by 0.2% between July and September, possibly marking the start of a recession.
He added: “So you would expect us to make sure that we are also cognisant of that, supporting the most vulnerable – as the Chancellor has said that we will do – but crucially, delivering on the expectations of international markets especially, to make sure that our fiscal position is on a more sustainable trajectory.”
Asked whether the budget would spell years of pain for people, Mr Sunak said: “The Chancellor has also said that part of our job is not just to bring stability back to the system, which we will do but it’s also to lay the foundations for the economy to recover and grow…
“That’s how we’re going to be able to cut people’s taxes over time and support public services.
“And you’ll hear that side of the equation from the Chancellor as well.”
Mr Sunak will return to the UK from the gathering of the leaders of major economies in Bali just in time for the highly anticipated budget on Thursday.
He will use the summit to urge fellow leaders to “step up to fix the weaknesses in the international economic system” and persuade them he will restore stability to the economy at home.
Mr Hunt on Sunday said “people with the broadest shoulders will bear the heaviest burden,” as he is understood to be weighing up a cut to the threshold at which the highest earners start paying the top rate of tax.
The Resolution Foundation think tank’s economists estimate that Liz Truss and Mr Kwarteng blew £20 billion on unfunded cuts to national insurance and stamp duty, with a further £10 billion lost to higher interest rates and Government borrowing costs, the Observer reported.
At the G20 summit, the Prime Minister evaded questions about whether that figure was correct and whether he would use the UK’s recent experience as a lesson of how things could go wrong.
He said: “I think I said on the steps of Downing Street that mistakes were made and part of the reason I became Prime Minister was to fix that.”
He pointed to global economic challenges such as soaring inflation after the Covid pandemic and Russia’s invasion of Ukraine.
“Those are shared challenges and what I’ll be talking about at the G20 with other leaders is what everyone is doing in their own countries and internationally to ensure resilience and stability in the financial system.”