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UK’s Sunak, under fire over cost of living, defends his tax cut plans

© Reuters. FILE PHOTO: British Chancellor of the Exchequer Rishi Sunak speaks at a statement on the economic update session, at the House of Commons in London, Britain March 23, 2022. UK Parliament/Jessica Taylor/Handout via REUTERS

LONDON (Reuters) – British finance minister Rishi Sunak said the headroom built into his tax and spending plans could easily be wiped out by weaker-than-expected growth or higher interest rates, underscoring his limits for easing a cost-of-living crisis.

“If you took the Bank of England’s economic outlook as opposed to the OBR’s (Office for Budget Responsibility), an equally credible institution, that would wipe out over half of it,” Sunak told lawmakers.

A 1% increase in BoE interest rates or a 1% change in the tax-to-gross domestic product ratio would wipe out the headroom entirely, Sunak said.

Last week, he announced tax cuts that he said would help households cope with a severe hit to their living standards, caused mostly by a jump in inflation but also higher taxes previously announced by Sunak.

His plans were widely criticised for not doing enough to help the country’s lowest-income households.

UK’s Sunak says fiscal headroom could easily be wiped out

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