Britain’s biggest tax cuts since 1972, pound crashes, US$44 billion support for power firms
- The pound and bonds fell after Chancellor of the Exchequer scrapped top rate of income tax, paid by richest, costing US$178.3 billion over next five years
- A US$44.17 billion scheme to help protect energy firms from volatile prices and ensure they are not hit by a liquidity squeeze, confirmed by the Treasury
Liz Truss’ government has set out the most radical package of tax cuts for Britain since 1972, reducing levies on both households and companies in an effort to boost the long-term potential of the economy.
The pound and UK government bonds fell after Chancellor of the Exchequer Kwasi Kwarteng scrapped an additional 45 per cent on the top rate of income tax, paid by only the richest earners, and cut the basic rate from 20 per cent to 19 per cent.
Kwarteng said from April 2023 Britain would have a single higher rate of income tax of 40 per cent, and no longer the additional rate of 45 per cent on income over 150,000 pounds (US$168,000).
The Conservative administration hopes its programme, which includes regulatory reforms will turbocharge the economy, staving off a recession that the Bank of England says has already begun and shaking the UK out of a decade of weak growth. Investors and economists expressed concern the package will drive the Treasury’s debt to unaffordable levels and fan inflation.
Kwarteng set a target of 2.5 per cent trend growth, a level not seen since before the 2008 financial crisis. “We promised to prioritise growth,” he told Parliament in London on Friday. “We promised a new approach for a new era.”
The cost of the package – £161 billion (US$178.3 billion) over the next five years – prompted a sell-off in both the pound and UK government bonds, with investors and economists worried about Britain’s already sizeable debt burden quickly becoming unmanageable.