The UK government puts in place tax cuts as the country prepares for recession

The new British government announced a sweeping program of tax cuts and investment incentives on Friday, as Prime Minister Liz Truss seeks to boost the country’s faltering economic growth.

Speaking to the House of Commons, Finance Minister Kwasi Quarting said the government wants a “new approach for a new era focused on growth” and is targeting a 2.5% medium-term trend rate in economic growth.

“We believe that higher taxes reduce incentives to work, discourage investment and discourage entrepreneurship,” Quarting said.

Procedures include:

• Repeal a planned increase in corporate tax to 25%, and keep it at 19%, the lowest rate in the G20.
• Reflection in the recent 1.25% rise in National Insurance contributions – a tax on income.
• Reducing the basic rate of income tax from 20p to 19p.
• Eliminate the 45% tax paid on income over £150,000 ($166,770), and raise the top rate to 40%.
• Significant reductions in stamp duty, a tax paid on home purchases.
• A nationwide network of “investment zones” where corporate tax breaks, liberal planning rules and reduced regulatory hurdles will be offered.
• Sales tax refund scheme for tourists.
• Eliminate the increase in tax rates on different types of alcohol.
• Abolishing the cap on bankers’ bonuses.

The government estimates the tax cuts will be £45 billion by 2026-27.

pound It fell to its lowest level in 37 years Against the dollar, below $1.107 shortly after the announcement, investors dumped British government bonds. Paul Johnson, director of the Institute for Fiscal Studies, said markets seemed “terrified” by the scale of the “financial giveaway”.

It comes a day after the Bank of England He said The British economy was likely to have entered an official recession in the third quarter, as it raised interest rates by 50 basis points to combat decades-high inflation. Economy Contracted 0.1% In the second quarter amid pressure in real incomes.

Although it contained extensive reforms, Friday’s package was not described by the government as an official budget because it was not accompanied by the usual economic forecasts from the Office of Budget Responsibility.

Critics of the proposals warn that the combination of broad tax cuts and the government’s prevention plan families And the Business High energy prices will see the UK assume high levels of debt at a time of high interest rates. The energy support package is expected to cost more than 100 billion pounds ($111 billion) over two years.

Data published on Wednesday showed that the UK government borrowed 11.8 billion pounds in August, well above expectations and 6.5 billion pounds more than in the same month in 2019, due to higher government spending.

Kwarteng said on Friday that the UK has the second lowest debt-to-GDP ratio in the G-7 and will announce a plan to reduce debt as a percentage of GDP over the medium term.

On energy, he said setting a price cap would reduce peak inflation by 5 percentage points and reduce broader cost-of-living pressures. He also announced a plan to fund energy markets, in conjunction with the Bank of England, which will provide a 100% guarantee to commercial banks providing emergency liquidity to energy traders.

Opposition Labor Party argue The tax cuts would disproportionately benefit the wealthy and would be financed by unsustainable borrowing.

Speaking in the House of Commons, the Croatian Workers’ Party to Rachel Reeves described the plans for a downward spiral of the economy and quoted US President Joe Biden, who He said this week He was “sick and tired” of this policy and it never worked.