Problems to be solved

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A decrease in the number of available energy providers is becoming a serious factor in reducing both production and consumption in the UK

By Vladislav Perevalov

British Petroleum has admitted that it will bring the UK Treasury £2.1bn in taxes this year. As a result of rising gas and oil prices, the company made £7.1 billion in just three months (July, August, September). However, the amount of taxes includes £700 million under the new 25% energy tax introduced by the UK Government in May. And today there are talks about extending the tax on excess profits of oil and gas companies for a period even after 2025.

The fact is that the new Prime Minister Rishi Sunak and the Chancellor of the Exchequer Jeremy Hunt are faced with a huge black hole in the public finances: it is now about £40 billion. Hunt’s plan is to raise taxes and cut Government expenditure. However, many politicians in the opposition Labour Party doubt that these measures will be effective enough.

Rishi Sunak, a multimillionaire and son-in-law of a multimillionaire, became the leader of the Conservative Party and Prime Minister of Great Britain on 25 October this year. He is the first Prime Minister of Indian origin in the UK history and the youngest Prime Minister for 210 years. Sunak was born in 1980 in Southampton (Hampshire, England) and spent a significant part of his life in America, where he received a master’s degree from Stanford University and worked for Goldman Sachs.

 The Indian President Narendra Modi has expressed his hope that Rishi Sunak will become some kind of bridge between the two countries and will be able to expand trade ties between them. As for British citizens, they hope that under Sunak the UK will return to the path of stable development and prosperity.

The new Prime Minister and his Chancellor of the Exchequer will have to deal with large-scale and very complex problems. In the first place, of course, there is the problem of a possible shortage of energy in the country in the winter. John Pettigrew, the Chief Executive of the UK’s National Grid, had to admit in an interview with the BBC that though he assumed the UK would have enough energy to meet winter needs, short power outages were still possible. He also added that it would be wise for the Government to start a campaign to reduce energy consumption this winter. Most consumers, however, do not need such calls: electricity prices are so high that many are already saving as much as they can.

So, in order to reduce the black hole in public finances the country’s Government intends to raise taxes. The wealthiest will bear the brunt of future tax increases, but this measure will inevitably affect everybody. The combination of rising taxes, energy bills and mortgage and rent payments will raise fears of the worst fall in living standards in a decade. One of the employees of the Exchequer put it this way: ‘We will have a hard time. The truth is that everyone will have to pay more taxes if we are to maintain public services. We can’t close the financial black hole just by cutting expenditure.’

Economic problems are growing. Inflation reached 10.1%, the highest rate in forty years. Clearly, it affects every family that does not have millionaires. Mr. Sunak is unlikely to succeed in stopping the drop in manufacturing and the overall fall in GDP, which may reach a critical point by April next year. To achieve any success here, the Prime Minister will need to closely monitor the state of the financial markets and look for difficult solutions in the raw material markets.

The rising cost of living has naturally led to public discontent, and further deterioration in living conditions will inevitably give rise to this discontent. A wave of strikes has already swept through the country at manufacturing plants and in transport services. Experts predict a new wave of strikes in the public sector: they will seriously affect the Tube, the buses and commuter trains. The National Health Service has not yet recovered from the crisis caused by Covid-19, and the number of people waiting for inpatient treatment and operations has increased significantly. Emergency care is overloaded.

A decrease in the number of available energy providers is becoming a serious factor in reducing both production and consumption. Mr. Sunak will obviously have to get serious about nuclear power plants, which will cause a negative reaction in the country and require huge funds. It is possible that he will have to agree to the extraction of oil by hydraulic fracturing, which will also lead to strong opposition from the majority of the UK population.

The growth of migration is an increasing burden on the country’s budget. This year alone 38,000 migrants have crossed the Channel to the UK. In comparison, last year there were just 10,000 of them. Meanwhile, industrialists and entrepreneurs want to see an influx of new migrants in the country: they need cheap labour.

Lastly, the new Prime Minister will have to make tough decisions in foreign policy, on which success in all the other areas of the country’s life largely depends. It is generally known that the UK has so far supported NATO’s course of confrontation with Russia in every possible way, and this requires the constant allocation of large sums to support Ukraine and participate in NATO plans in connection with the situation in Eastern Europe.

Significant efforts will also be required to create a mechanism for balanced trade with China, and here the UK, being in the same boat with the USA, has to accept Washington’s position on Taiwan. Under these conditions relations with China are becoming ever more problematic, and this naturally affects trade relations. Before and just after Brexit the UK could count on help from other European countries, but now they themselves are having serious problems, especially in energy and financial areas, due to continuous military assistance to Ukraine.

Economists within the Labour Party believe that Rishi Sunak may be able to solve one or even two of the above-mentioned problems, but in general they have the force to strike.

Independent experts in the UK believe that the country will not be able to solve its problems until its government stops acting with an eye on such politicians as Macron, Scholz and Biden, and pursues a policy that meets the interests of all its citizens.

However, so far all the leaders of the Conservative Party have not lagged behind the United States in almost all international political actions, and this situation is unlikely to change in the near future.

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