After a simply awful year for Great Britain, they eventually had to announce a recession, the first major economy to do so.
Recession! A word uttered by so many news outlets, politicians and policy makers. After a year of inflation, war, economical crisis, in the end one major economy broke the ice announcing recession. It is the United Kingdom, a country that has faced other critical issues for years on end. The UK, however, will likely be followed down the recession hole by Europe and the US.
Announcing it was Finance Minister Jeremy Hunt, which survived the fall of Liz Truss’ government and continued under Rishi Sunak. Hunt finally revealed the new government’s financial plan, and it did not look pretty.
£30 billion in spending cuts and £25 billion in tax hikes, widely different from the vastly criticized £45 billion tax cuts proposed by Liz Truss. Truss hoped that by taxing the rich less she would attract more investment into the country. But the UK did not need dream-like long-term investments. The UK needs a revenue stream. Now.
And yes, Jeremy Hunt went on saying that the UK is “already in a recession”. His plan announcement coincided with an OBR (Office of Budget Responsibilities) report that confirmed a “year long recession” has started.
The OBR report also shows that, because of inflation, the UK’s yearly debt coincided with annual GDP growth. They forecast that Britain will not come back to pre-pandemic levels until at least 2024.
Overall, a complete economical disaster that is just on top of a messy political landscape.
The UK’s political crisis
The UK has gone through a particularly turbulent year. In fact, ever since the Brexit Referendum, Great Britain seems to have lost her privileged spot on the global stage. It is the only G7 nation to have never recovered pre-Covid levels of growth. Inflation, unemployment and the energy crisis have hit Great Britain harder than the EU average.
Since 2016, the year of the infamous referendum, the UK has gone through five different Prime Ministers. They were all members of the Conservative Party, and the 2020 elections confirmed Boris Johnson’s hold on power.
A series of scandals, however, eventually brought down Johnson which resigned earlier this year. His successor, appointed in September, was Liz Truss. Her tenure lasted a bit over two months, the shortest in British history.
Before resigning, she had proposed a terribly inappropriate financial plan to revitalize the British economy. She and at-the-time Finance Minister Kwasi Kwarteng announced a tax cut for the richest percentile. The move was so badly received that even the IMF and US President Joe Biden advised against it.
Eventually, Liz Truss had to step back, which later brought to her unavoidable resignation. Now, Conservative PM Rishi Sunak was left with no choice but to approve a brutal financial plan that meant a definitive recession.
