Britain is set to hike taxes and cut public spending in a government budget on Thursday, signaling a return to austerity despite a cost-of-living crisis for millions in an economy mired in recession.

Conservative Prime Minister Rishi Sunak, who took office just three weeks ago, has vowed to fix the economic mess wreaked by his short-lived predecessor, Liz Truss.

But he thinks of skyrocketing energy bills, decades of inflation and rising interest rates putting pressure on households.

Treasury Secretary Jeremy Hunt is set to present his crucial budget in Parliament alongside official economic and inflation forecasts – with the latest data signaling a bleak outlook.

Chancellor of the Exchequer Hunt is expected to present a budget consolidation totaling between £50 and 60 billion (between US$58.7 and US$70.5 billion), media reports suggest.

“We’re all going to pay a little more tax, I’m afraid,” Hunt told British media over the weekend, comparing himself to the thrifty miser Ebenezer Scrooge in Charles Dickens’ holiday favorite A Christmas Carol.

“We will demand sacrifices from everyone,” he said, but stressed that the pain would fall disproportionately on the better off.

In even grimmer news, the UK economy contracted in the third quarter as inflation surged, the latest data showed, likely confirming that it is already in recession.

The Bank of England has announced that the UK economy would also contract in the current latest quarter, meaning the economy is in a recession that could last into mid-2024.

“The great fiscal tightening…comes right as the recession begins,” noted Ashley Webb, an analyst at Capital Economics.

“The clear risk is that fiscal consolidation deepens the recession,” he warned.

Truss’ unfunded tax cut budget sparked a collapse in the pound and an explosion in government borrowing costs during her 49-day tenure, which began in September.

Investors fretted over a £200 billion black hole forcing the Bank of England into emergency intervention.

She then sacked her finance minister, Kwasi Kwarteng, and replaced him with Hunt, who set about rolling back the much-criticized budget and avoiding a costly freeze on domestic fuel bills.

But that wasn’t enough to keep Truss at Downing Street.

Markets have stabilized again after Sunak took over and political turmoil eased, but retail mortgage rates remain high.

“What we are seeing now is that stability has returned to the UK,” Sunak told Sky News in Bali, Indonesia, where he is attending the G20 summit.

“But that’s because the government will be making these difficult but necessary decisions to ensure we can get a grip on inflation, bring it down for people with the cost of living and also limit the rise in mortgage rates.

“I really want people to be reassured that … fairness and compassion are at the core of every decision we make.”

Economic storm clouds could deepen further this week, with unemployment and inflation data due on Tuesday and Wednesday respectively.

The BoE this month made its biggest rate hike since 1989 to combat skyrocketing inflation, which is at a four-decade high of over 10 percent, as energy and food prices soar in the wake of the Ukraine war.

The bank’s policy rate has shot up from 0.1 percent to 3.0 percent in less than a year, which in turn has pushed up home loan repayments and worsened the cost-of-living crisis.

Britain’s main opposition Labor party has slammed Sunak, arguing that a second wave of austerity is not the answer.

“I don’t think Austerity 2.0 is the right approach after the austerity we’ve been through over the last 12 years,” said Labour’s finance spokeswoman Rachel Reeves.

“Public services are already on their knees,” added Reeves, a former Bank of England economist, calling it a “disgrace” that nurses have been forced to go on strike.

Tens of thousands of workers in various sectors have already gone on strike across the UK this year in a bid for higher wages.

Reports suggest that Hunt will freeze income tax rate thresholds, meaning more people will be drawn into higher tax brackets over time.

He could also overhaul the government’s energy bill support scheme with more targeted measures.

And Hunt could increase the windfall tax on oil and gas giants, whose profits have skyrocketed in the aftermath of Russia’s war in Ukraine.